Establishment of Industry in Export Processing Zones in India

March 29, 2019
Business opportunities

In the era of ever-increasing competition, nations, especially developing countries make a lot of efforts to promote the economic growth by the generation of business opportunities. With the improved infrastructure facilities, communication channels and investor friendly policies, India is becoming an increasing attraction for business persons across the world.

Export Processing Zones in India

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla in 1965. The Special Economic Zones (SEZs) were set up with the objective of :

  • Overcoming the shortcomings experienced due to multiplicity of controls and clearances;
  • attract larger foreign investments in India.
  • generation of additional economic activity
  • promotion of exports of goods and services
  • promotion of investment from domestic and foreign sources
  • ┬ácreation of employment opportunities
  • ┬ádevelopment of infrastructure facilities

Benefits in SEZ

Some of the advantages of investing of SEZ are listed below:

  • Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs;
  • Single window clearance for setting up a unit in a Special Economic Zone;
  • Single Window clearance on matters relating to Central as well as State Governments;
  • Simplified compliance procedures and documentation with an emphasis on self-certification
  • Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units
  • 100% Income Tax exemption on export income for SEZ units (Section 10AA of the Income Tax Act) for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. (Sunset Clause for Units will become effective from 01.04.2020)
  • Exemption from Central Sales Tax, Exemption from Service Tax and Exemption from State sales tax. These have now subsumed into GST and supplies to SEZs are zero rated under IGST Act, 2017.
  • Other levies as imposed by the respective State Governments.

Setting up SEZ

The SEZs are established in accordance to the provisions of the Special Economic Zones Act, 2005 which provides for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. SEZs are also operative as per the provisions of the local State legislations and rules working as a strong catalytic of regional development and for the matters connected therewith or incidental thereto.

Any individual, co-operative society, company or partnership firm can file an application for setting up of Special Economic Zone in Form-A to the concerned State Government and the Board of Approval in the Department of Commerce, Government of India. Once the Board of Approval gives formal consent and the concerned Development Commissioner gives an inspection report certifying the contiguity and vacancy of the area, the area is notified as SEZ.

Status in India

Over the passage of years there has been a significant improvement in the investment amount in the SEZs in India (ref. below):

(As on February, 2006)
Incremental Investment Total Investment
(As on 30th September, 2018)
Central Government SEZs Rs.2,279.20 cr. Rs.17,101.80 cr. Rs.19,381 cr.
State/Pvt. SEZs set up before 2006 Rs.1,756.31 cr. Rs.11,195.69 cr. Rs.12,952 cr.
SEZs Notified under the Act _ Rs.4,59,979 cr. Rs.4,59,979 cr.
Total Rs.4,035.51 cr. Rs.4,88,276.49 cr. Rs.4,92,312 cr.

Source: Ministry of Commerce & Industry, Department of Commerce

This has also resulted in generation of employment thereby boosting the Indian economy (ref. below):

(As on February, 2006)
Incremental Employment Total Employment
(As on 30th September, 2018)
Central Government SEZs 1,22,236 persons 1,17,634 persons 2,39,870 persons
State/Pvt. SEZs set up before 2006 12, 468 persons 88,201 persons 1,00,669 persons
SEZs Notified under the Act 0 persons 16,56,071 persons 16,56,071 persons
Total 1,34,704 persons 18,61,906 persons 19,96,610 persons

Source: Ministry of Commerce & Industry, Department of Commerce

For more information please contact us at :