Tax Benefits to Special Economic Zone (SEZ), Special Economic Zones and Tax Incentives in India, Check all Facilities and Incentives to SEZ India. My this article is about the tax benefits which are available to the Special Economic Zone developers for establishing such a enterprise in such a area. This tax benefits are available to the SEZ units because of the development of the area and to make such area more enhanced and progressed in comparison to other areas.

The best example for great development in the country by way of SEZ is China. China has successfully implemented the schemes for SEZs and has succeeded very much. The proportion of the SEZ exports in comparison to the total exports is around 30% which is a good figure. Now you can scroll down below and check more details regarding “Tax Benefits to Special Economic Zone (SEZ)”

Tax Benefits to Special Economic Zone (SEZ)

What is meant by Special Economic Zones ?

Special Economic Zones are the areas of the country in which there is great need of development and so government has notified such areas a deemed foreign territory and the sales made to that area would be considered as exports and the purchases made from such place will be regarded as imports. The main objective to give relaxation to SEZ is to promote export and the other related things there off.

There are many benefits of setting up of SEZ such as creation of employment, development of the backward place and infrastructure, economy will grow, foreign and domestic investment, promotion of goods and services,etc.

The locations where SEZ acts are applicable are Gujarat, Madhya Pradesh, Haryana, Punjab, West Bengal and Tamil Nadu.

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Administrator Levels in SEZ procedure:

Administrator Levels in SEZ procedure

Persons establishing the SEZ are known as the SEZ Developer, carrying out the exports from the SEZ is known as SEZ unit. The SEZ would be set up by the approval of Ministry of Commerce after suggestion by State Government. The SEZ can be established for any on the three options – manufacturing, trading, or service.

Tax Benefits Under SEZ:

Service Tax:

Service tax is fully exempt to the SEZ, subject to criteria. That criteria is the services received during the year should be utilised for the purpose of SEZ only and no where else. If it is partly used for SEZ and partly used for some other purpose than half service tax can be claimed as refund from the concerned authority.

The other regulatory requirements are that they should be approved by the approval committee and should fill the Form A-1 in prescribed time limit.

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CST is exempt to the SEZs, if they are procured from other state and given the Form I which is specified under CST Act. Now VAT exemption to the SEZ depends on the specific State VAT laws which may differ from state to state.

Income Tax

The deduction would be allowed under section 10AA of he income tax Act, the deduction would be as follows:

Income Tax Deductions SEZ

Must Read – Section 194c


The same treatment has to be given to the SEZ as to be given in normal case in comparison to normal export transaction. The duty drawback would be provided by the company provided that the payment for the same is made in foreign currency. As SEZ developers cannot make payments in foreign currency as it is one country only, government has given another way to take the benefit and that is Reimbursement of duty instead of drawback.

Capital Gains and FDI:

There would be no capital gains in case of transfer of property from one owner to another and 100% FDI is allowed in SEZ units, except of some dangerous weapons for use in defense sector.

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