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Special Economic Zone

The Foreign Trade Policy of the Government of India provides for setting up of Special Economic Zones (SEZ) in the country with a view to provide an internationally competitive hassle free environment for exports. Units may be set up in SEZ for manufacture of goods and rendering of services. The units in SEZs have to be a net foreign exchange earner but they are not subjected to any pre-determined value addition or minimum export performance requirements. Sales in the domestic tariff area (DTA) by SEZ units are subject to payment of full custom duty and import policy inflows.

The law relating to SEZ is contained in Special Economic Zone Act, 2005 and Foreign Trade Policy 2004-09 of the Government of India.

SEZs could be set up in public, private, joint sector or by State governments. 100% FDI is allowed in setting up of SEZs. The Government of India has also converted existing Export Processing Zones into SEZs.

The minimum size of the SEZs should be 1000 hectares except in product specific and port/airport based SEZs. Approval for setting up of new SEZs is given by Department of Commerce, Government of India.

For setting up units in SEZs, all approvals are given by a Committee headed by Development Commissioner of the concerned SEZ. For setting up a unit in SEZ, application in prescribed format should be submitted to the development Commissioner.

A large number of new SEZs have come up in private sector in India including SEZs set up by foreign companies. A number of new SEZs have been set up by State governments. List of SEZs

Facilities to SEZ Units

Detailed policy applicable to SEZ units is given in Appendix 14-II of Handbook of Procedures Vol-I of Director General of Foreign Trade (DGFT).
  • SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, office equipment etc., for setting up of units or further operations without any license or specific approval
  • Goods imported/procured locally duty free could be utilized over the approval period of five years
  • 100% income tax exemption (Section 10 A) for first five years and 50% for two years thereafter
  • 100% FDI is allowed in manufacturing sector in SEZ units under automatic route except sectors requiring industrial license. 100% FDI allowed in items reserved for small scale units
  • Setting up of offshore banking units allowed in SEZs. They would be entitled for 100% income tax exemption for three years and 50% for next two years
  • More flexible exchange control regulations for units in SEZs and for external commercial borrowing upto $ 500 million in a year
  • Exemption from service tax to SEZ units
For more details, please go to the website of SEZs maintained by Department of Commerce, Government of India at

Set up SEZ Enterprise:
SEZ Act 2006:

Also browse through our 'Publication' section for more information.