SPECIAL ECONOMIC ZONES (AMENDMENT) ACT, 2019

Context

Recently, Indian Parliament has passed the Special Economic Zone (Amendment) Bill, 2019.

Key Features of the Act

Special Economic
Zones (SEZs)

• It amends the Special Economic Zones Act, 2005 and replaces Special Economic Zones Ordinance, 2019.

• SEZ Act, 2005 provides for the establishment, development and management of Special Economic Zones for the promotion of exports.

• Under the Act of 2005, the definition of a person includes an individual, a Hindu undivided family, a company, a co-operative society, a firm, or an association of persons.

 The Amendment Act adds two more categories to this definition by including a trust, or any other entity which may be notified by the central government.

 A trust or any entity notified by the central government will be eligible to be considered for grant of permission to set up a unit in these zones, which enjoy certain tax and other incentives.

• The Amendment opens up the possibility for all types of trusts to operate from the SEZs - public charitable trusts, private trusts run by big and small corporate houses, business trusts like real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), private companies with their own PF trusts and port trusts run by the government.

• The amendment would also facilitate the use of the SEZ land lying vacant.Administrative Set-up of SEZs

• The functioning of the SEZs is governed by a three tier administrative set up.

 Board of Approval is the apex body and is headed by the Secretary, Department of Commerce.

 Approval Committee at the Zone level deals with approval of units in the SEZs and other related issues.

 Each Zone is headed by a Development Commissioner, who is ex-officio chairperson of the Approval Committee.

• All the proposals for setting up of units in the SEZ are approved at the Zone level by the Approval Committee consisting of Development Commissioner, Customs Authorities and representatives of State Government.

• All post approval clearances including grant of importer-exporter code number, change in the name of the company or implementing agency, broad banding diversification, etc. are given at the Zone level by the Development Commissioner.

• The performances of the SEZ units are periodically monitored by the Approval Committee and units are liable for penal action under the provision of Foreign Trade (Development and Regulation) Act, in case of violation of the conditions of the approval.

• Once an SEZ has been approved by the Board of Approval and Central Government has notified the area of the SEZ, units are allowed to be set up in the SEZ.

• 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.

• SEZ is an area in a country that is subject to unique economic regulations that differ from other regions of the same country.

• It is a specifically delineated duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.

• SEZs are zones intended to facilitate rapid economic growth by leveraging tax incentives to attract foreign dollars and technological advancement.

• The SEZ Rules provide for different minimum land requirement for different class of SEZs.

• Every SEZ is divided into a processing area where alone the SEZ units would come up and the non-processing area where the supporting infrastructure is to be created.