Special Economic zones are the special areas created by government where companies get very good facilities like connectivity, roads, electricity, water etc. Under SEZ business and trade laws are different from normal area.
SEZ in India was created under "The Special Economic Zones Act, 2005" passed in May 2005 and this Act came into force on 10th February 2006.
Why SEZs are created:
In a country the economic conditions of each and every states are not same, some states are developed and their economic condition is strong at the same time some other states are considered poor due to their weak economic condition. To overcome this inequality of economic conditions between states SEZ act was introduced so that the condition of economically backward areas can be enhanced.
The objectives of SEZ:
1) Enhance FDI (Foreign direct investment) - Multi national companies will be attracted because of the facilities provided in SEZ locations and foreign companies will invest in that particular country.
2) Enhance domestic investment - Domestics companies will also be attracted because of tax benefits, flexible labor laws, available facilities etc.
3) Create employment - When new companies will invest new job opportunities will be created and more people will get employed.
4) Enhance exports - Due to various benefits manufacturing companies will be attracted and manufactured products will be exported to different countries and trade balance will be increased.
Benefits of SEZ:
1) Duty exemption for Imports - If any company under SEZ imports any product related to project development, their import duty will be waived off/ exempted.
2) Tax benefits - For Export profits under SEZ 100% income tax will be exempted for 1st 5 years and 50% income tax will be exempted for next 5 years and 50% will be exempted of deposited in reserve.
3) Flexible labor laws - Normal labor law is not implemented in SEZ units, labor law made flexible for the companies under SEZ which help companies to do the business in hassle free manner.
4) Single window clearance for central & state government matters, this simplifies the documentation process.
5) Good facilities & connectivity - SEZ locations are having world class facilities with very good connectivity. SEZs are well connected to public transports, local railway, nearest airports.
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