DEFINITION OF A SPECIAL ECONOMIC ZONE OR SEZ
A Special Economic Zone or SEZ is a specifically delineated duty-free enclave deemed to be A foreign territory for the purposes of trade operations, duties and tariffs. All trade inflows into the SEZ are treated as imports and all outflows from the SEZ are treated as exports. The concept of SEZ was introduced by the Indian Government in the EXIM Policy 2000. Since then, the SEZ Act has been passed in 2005 and the rules and regulations governing the same have been notified in 2006. The word “special” mainly means special economic systems and policies. The preferential policy framework within which an SEZ functions is designed to give an impetus to exports and provide the necessary supporting environment to make these export hubs an attractive investment destination point for global as well as domestic players with multi-lateral trade dimensions.

DEMARCATION OF SEZ’s
The SEZs may have areas demarcated as:
  Processing Areas (for setting up of units for production of goods and rendering of services.)
  Non-Processing Areas

In the processing area one can carry out manufacturing or services and in non-processing areas residential and commercial space can be constructed.

SOME OF THE ADVANTAGES OF BEING IN A SEZ
As per current SEZ guidelines and to the best of our understanding, the following are some of the advantages:

	100% income tax exemption for a block of five years and 50% for the subsequent five years.
	100% exemption for subsequent 5 years if the profits are ploughed back for reinvestment into the SEZs.
	100% income tax exemption in a block of 10 years out of 15 years for the SEZ developer and co-developer (as per choice of developer).
	Exemptions from customs and excise duties, VAT, sales tax, service tax, octroi and local taxes on domestic procurement of construction material, capital equipment, raw material, spares, and consumables as well as imports. Please note that local taxes / duties which are under the purview of the State Government are governed by the respective State Governments.
	Exemption on stamp duty and land registration charges.
	100% foreign direct investment permitted.
	Single window clearances.
	On-site customs and self-certification processes.

For further details pleae refer to GOI’s website: www.sezindia.nic.in