15 Years of SEZs – Hits and Misses!

[2021] 133 taxmann.com 337 (Article)

Introduction

Special Economic Zones (‘SEZs’) are demarcated areas within India, that offer incentives to businesses such as competitive infrastructure, duty-free procurements, fiscal incentives and other measures designed to make it easier and smoother to conduct business. SEZs in India thus become a popular investment destination for many multinationals, particularly exporters. The Special Economic Zones Act, 2005 (‘the SEZ Act’) came into force along with the SEZ Rules in 2006 with the following key objectives :

• • Generation of additional economic activity
  • Promotion of exports of goods and services
  • Promotion of investment from domestic and foreign sources
  • Creation of employment opportunities
  • Development of infrastructure facilities

The SEZ scheme, to an extent, has met its objectives as for the FY 2020-21, the total exports touched INR 7.60 lakh Crore while investment in SEZ reached approx. INR 6.18 lakh Crore. SEZs employ more than 23 lakh people. There are around 5500 SEZ units and the exports contributed to nearly 1/3rd of total exports from India.

The functioning of the SEZs is governed by a three-tier administrative set-up:

• • Board of Approval is the apex body chaired by the commerce secretary of GOI
  • Unit Approval Committee (‘UAC’) at the zonal level dealing with the approval of units
  • Each Zone is headed by a Development Commissioner, who is also heading the UAC

The performances of the SEZ units are monitored annually by the UAC and units are liable for penal action in case of violation of the conditions of the approval.

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