April 19, 2023

Special Economic Zones (SEZs) are defined regions offering specific economic regulations, tax incentives, and other amenities to attract investment, promote industrial growth and stimulate exports. Introduced by the Indian government in 2005, SEZs have been established throughout the country. Newly established units within SEZs receive several provisions to encourage investment and export activities. Here are some of the benefits provided to these units: Tax Advantages: Units within SEZs are entitled to income tax benefits as per the Income Tax Act.   Customs Benefits: Units within SEZs are allowed to import capital goods, raw materials, and other production inputs duty-free. They are also permitted to procure goods from the domestic market without paying customs duty. This concession reduces operational costs, making them more competitive in the global market. Foreign Investment: Foreign investors can invest in units within SEZs through the automatic route, which does not require prior government approval. This provision encourages foreign investment in SEZs, creating jobs and boosting economic growth. Streamlined Processes: Units within SEZs are granted simplified procedures for importing and exporting goods. They can self-certify the origin of goods and issue certificates of origin for export purposes. They are also allowed to maintain accounts in foreign currency, which simplifies accounting and enables faster payment settlement. Single Window Clearance: Units within SEZs receive a single window clearance system for all approvals and clearances required for their operations. This system simplifies the process of obtaining various approvals and clearances from different authorities, reducing time and cost. In conclusion, SEZs provide special provisions to newly established units to promote investment, exports, and economic growth. SEZs have successfully attracted foreign investment, boosted exports, and created employment opportunities. The Indian government is continually improving the SEZ policy to make it more effective and appealing to investors. section 10AA of Income Tax Act, 1961 (1) Subject to the provisions of this section, in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of section 2 of the Special Economic Zones Act, 2005, from his Unit, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, but before the first day of April, 2021, the following deduction shall be allowed— (i)  hundred per cent of profits and gains derived from the export, of such articles or things or from services for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or things or provide services, as the case may be, and fifty per cent of such profits and gains for further five assessment years and thereafter; (ii)  for the next five consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the “Special Economic Zone Re-investment Reserve Account”) to be created and utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2). Explanation.—For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee. (2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :— (a)  the amount credited to the Special Economic Zone Re-investment Reserve Account is to be utilised—  (i)  for the purposes of acquiring machinery or plant which is first put to use before the expiry of a period of three years following the previous year in which the reserve was created; and  (ii) until the acquisition of the machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India; (b)  the particulars, as may be specified by the Central Board of Direct Taxes in this behalf, under clause (b) of sub-section (1B) of section 10A have been furnished by the assessee in respect of machinery or plant along with the return of income61 for the assessment year relevant to the previous year in which such plant or machinery was first put to use. (3) Where any amount credited to the Special Economic Zone Re-investment Reserve Account under clause (ii) of sub-section (1),— (a)  has been utilised for any purpose other than those referred to in sub-section (2), the amount so utilised; or (b)  has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of sub-section (2), the amount not so utilised, shall be deemed to be the profits,—  (i)  in a case referred to in clause (a), in the year in which the amount was so utilised; or (ii)  in a case referred to in clause (b), in the year immediately following the period of three years specified in sub-clause (i) of clause (a) of sub-section (2), and shall be charged to tax accordingly : Provided that where in computing the total income of the Unit for any assessment year, its profits and gains had not been included by application of the provisions of sub-section (7B) of section 10A, the undertaking, being the Unit shall be entitled to deduction referred to in this sub-section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided in clause (ii) of sub-section (1). Explanation.—For the removal of doubts, it is hereby declared that an undertaking, being the Unit,