Union Budget 2022: How do Companies get Benefitted from SEZs?

Finance Minister Nirmala Sitharaman announced a new chapter (SEZ 2.0) of the Special Economic Zone in Budget 2022. This will increase the strength of the single-window clearance.
Union Budget 2022

Union Budget 2022

Image Credit: TFE

Finance Minister Nirmala Sitharaman announced a new chapter (SEZ 2.0) of the Special Economic Zone in Budget 2022. Sitharaman stated that the laws of SEZs would be revised very soon with the convenience of conducting business in mind. The new law will strengthen the power of state governments. Commerce Secretary BVR Subramaniam stated that this will hasten the pace of manufacturing progress. The national government is now looking for state partners. The Modi administration is working on the New Development of Enterprise and Service Hubs (DESH), also known as SEZ 2.0. This will increase the strength of the single-window clearance.

Our country's SEZ Act went into effect in 2006. The government hoped to attract international investors with the aid of SEZs. Aside from that, she intended to encourage export. To entice investors, the Special Economic Zone offers a variety of tax breaks. The benefit of establishing an SEZ is obvious. In 2005-06, SEZ exports totalled $3 billion, a value that has risen to $83 billion in the subsequent 16 years. The domestic industry benefits from SEZs as well.

<div class="paragraphs"><p>Finance Minister Nirmala Sitharaman</p></div>

Finance Minister Nirmala Sitharaman

Image Credit: Budget Standards

States to be made partners in DESH

It is because of this special economic zone that China is still a worldwide industrial powerhouse today. There is a lot of foreign investment, which leads to a trade surplus in the hundreds of billions of dollars and a manufacturing centre with firms from all over the world. SEZs were established in India for a similar purpose, although the anticipated success has yet to be realised. According to the Finance Minister's declaration, the states would be designated partners in the development of enterprise and service hubs under the new law (DESH). Aside from that, the emphasis will be on exports. In addition, all industries will benefit from this.

100% tax relief on export income

According to experts, the popularity of SEZs has declined since the government introduced the Minimum Alternate Tax for Special Economic Zones. Aside from that, the tax incentive clause has been removed. Currently, SEZ units receive a 100% tax exemption on export income for the first five years. For the next five years, there is a 50% tax break on export revenue.

<div class="paragraphs"><p>Currently, 268 SEZs are operational in the country</p></div>

Currently, 268 SEZs are operational in the country

Image Credit: The Financial Express

Currently, 268 SEZs are operational in the country

Currently, 425 Special Economic Zones have been established throughout the nation. 268 of these are operating. The Finance Minister stated in his budget statement that SEZ 2.0 will be implemented by September 30, 2022. To enhance production, the PLI programme was announced in April 2020. This plan currently applies to 13 industries. To boost exports, 350 customs duty exemptions were removed from the budget. These steps, according to experts, will have an impact.

25% jump in exports in the current financial year

The Special Economic Zone has drawn 6.28 lakh crore in investment and employed 25 lakh 60 thousand 286 persons as of September 30, 2021. In the current fiscal year, between April and December, there was a 25% increase in exports from SEZs, totalling Rs 6.89 lakh crore (about $ 93 billion). The total value of exports from the Special Economic Zone in the fiscal year 2020-21 was $102.32 billion.

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