The Government of India had announced a SEZ scheme in April, 2000 with a view to provide an internationally competitive environment for exports. The objectives of SEZs include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export-led growth.
Under the act, SEZ could be set up either jointly or severally by the Central Government, State Government, or any person (including a private or public limited company, partnership or proprietorship).
- for manufacture of goods; or
- for rendering services; or
- for both manufacturing of goods and for rendering services; or as a Free Trade and Warehousing Zone.
The incentives and facilities offered to the units in SEZs:
- 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 under 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
- External commercial borrowing by SEZ unit’s upto US $ 500 million in a year without any maturity restriction through recognized banking channels
- Exemption from Central Sales Tax
- Exemption from Service Tax
- Single window clearance for Central and State level approvals
- Exemption from State sales tax and other levies by the respective State Governments
- The incentives and facilities available to Special Economic Zone developers
- Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA
- Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act
- Exemption from dividend distribution tax under Section 115O of the Income Tax Act
- And Exemption from Central Sales Tax (CST)
- allowances from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).
1. Software Technology Park Scheme
The Software Technology Park (STP) Scheme is a 100 percent Export Oriented Scheme for the development and export of computer software, including export of professional services using communication links or physical media This scheme is unique in its nature as it focuses on one product / sector, i.e. computer software. The scheme integrates the government concept of 100 percent Export Oriented Units (EOU) and Export Processing Zones (EPZ) and the concept of Science Parks / Technology Parks, as operating elsewhere in the world
Scheme Benefits & Highlights
- Approvals are given under single window clearance scheme.
- A company can set up STP unit anywhere in India Jurisdictional STPI authorities clear projects costing less than Rs.100 million with Indian Investment
- 100 Percent Foreign Equity is permitted
- All the imports of Hardware & Software in the STP units are completely duty free, import of second hand capital goods also permitted
- Re-Export of capital goods is also permitted
- Simplified Minimum Export Performance norms i.e. “Positive Net Foreign Exchange Earnings”
- Use of computer system for commercial training purposes is permissible subject to the condition that no computer terminals are installed outside the STP premises
- The sales in the Domestic Tariff Area (DTA) shall be permissible up to 50 Percent of the export in value terms.
- STP units are exempted from payment of corporate income tax up to 2010.
- The capital goods purchased from the Domestic Tariff Area (DTA) are entitled for benefits like exemption of excise Duty & reimbursement of Central Sales Tax (CST)
- Capital invested by Foreign Entrepreneurs, Know-How Fees, Royalty, Dividend etc., can be freely repatriated after payment of Income Taxes due on them
- The items like computers and computers peripherals can be donated to recognized non-commercial educational institutions, registered charitable hospitals, public libraries, public funded research and development establishments, organizations of Govt. of India, or Govt of a State or Union Territory without payment of any duties after two years of their import
- 100 Percent Depreciation on Capital Goods over a period of five years.
- An Indian company
- A subsidiary of foreign company
- A branch office of foreign company
2. Schemes and Policies of Electronic Hardware Schemes Policies
- Special Economic Zones (SEZ) Scheme
- Electronics Hardware Technology Park (EHTP) Scheme
- Export Oriented Unit (EOU) Scheme
- Export Promotion Capital Goods (EPCG) Scheme
- Duty Exemption and Remission Schemes
- Deemed Exports
Special schemes are available for setting up Export Oriented Units for the Electronics Hardware Sector. Various incentives and concessions are avail
|Benefits||EHTP/STP/EOU Unit||SEZ Unit|
|Foreign Equity permissible||100% FDI investment permitted through automatic route||100% FDI investment permitted through automatic route|
|Duty free imports/ domestic procurement permissible||Capital goods, Raw materials, Components and other inputs||All goods for development, operation and maintenance|
|Income Tax Benefit||Export profits 100% tax-exempt under Sections 10A/10B of the Income Tax Act (upto 31st March 2011)||100% Income Tax exemption on export profits under Section 10AA of the Income Tax Act for 5 years, 50% for next 5 years thereafter and 50% of ploughed back export profit for next 5 years|
|Export Obligation||Unit shall be a positive Net Foreign Exchange (NFE) Earner. Supplies of ITA-1 items manufactured by these units in the Domestic Tariff Area (DTA) shall be counted towards fulfillment of export obligation||Unit shall be a positive Net Foreign Exchange (NFE) Earner. Supplies of ITA-1 items manufactured by these units in the Domestic Tariff Area (DTA) shall be counted towards fulfillment of export obligation|
|DTA Sales||DTA sales permissible upto 50% of FOB value of exports, subject to fulfillment of positive NFE, on payment of concessional duties (50% of basic customs duty and full excise duty). DTA sales beyond this entitlement are permissible against payment of full duties provided the unit has achieved positive NFE||DTA sales permissible on payment of full duties. However, the unit is required to be a positive Net Foreign Exchange (NFE) Earner over the five year period of its operation.|
|Central Sales Tax||Refundable||Exempted|
|Supplies from DTA||Deemed Export||Physical Export|
3. EOU SCHEME
100% EOUs in the jurisdiction of DC, SEEPZ-SEZ (Maharashtra, Goa and Union Territory of Dadra Nagar Haveli, Daman & Diu):
The EOU scheme was introduced in the year 1980 vide Ministry of Commerce resolution dated 31st December 1980. The purpose of the scheme was basically to boost exports by creating additional production capacity, earn Foreign Exchange to the country, transfer of latest technology, stimulate direct investment and to generate additional employment.
The Export Oriented Unit (EOU) Scheme, remains in the forefront of country’s export production schemes. The scheme has witnessed many changes over the last twenty-nine years in the context of ever changing economic realities. However, the basic premise remains the same. This premise is that the exporters are treated as a special class and given the required tariff, non-tariff and policy support to facilitate their export efforts. Thus, today the EOU Scheme has emerged as a dynamic policy initiative facilitating the exporting community in the task of increased exports.