As of the year 2023, India is home to 272 SEZs that provide employment to around 2.8 million individuals. These SEZs have significantly contributed to the SEZ business benefits in India, generating US$133 billion in exports, with service exports making up 60 percent of this total figure. In the year 2022-23, goods exported from SEZs amounted to US$61 billion, with Kandla SEZ in Gujarat alone responsible for US$38 billion of this amount. Investments in these zones surged to INR 656 billion (equivalent to US$7.87 billion) by December 2022, according to Statista (US dollar equivalent based on INR 83.26).

Although Indias SEZs bear resemblances to those found in regions it is essential for business leaders contemplating entry, into an Indian SEZ to grasp the specific intricacies of each zone. Each SEZ operates under its set of regulations and incentives. 

Foreign companies are recommended to research market entry options comparing different locations, available resources, tax advantages and expenses before scheduling on site visits. 

Special Economic Zones (SEZs) function, as designated duty areas that operate outside of Indias customs jurisdiction for business activities. Import licenses are not required in SEZs allowing for both manufacturing and service operations. SEZ units must demonstrate a foreign exchange balance over a five year period starting from the commencement of production. While domestic sales within SEZs are subject to customs duties and must adhere to import policies these units have the flexibility to engage in subcontracting. Moreover mandatory routine inspections of export/import cargo, by customs officials do not apply within SEZs. Developers, Co Developers and Units operating within SEZs qualify for indirect tax benefits as stipulated in the 2005 SEZ Act. 

The development of SEZs in India 

The Indian government has a history of utilizing Export Processing Zones (EPZs) to enhance exports with the first EPZ, in Asia being established in 1965 in Kandla, Gujarat. While EPZs and Special Economic Zones (SEZs) have similarities the government introduced SEZs in 2000 as part of the Foreign Trade Policy to tackle issues such as regulations, infrastructure limitations and an inconsistent fiscal framework. This move was aimed at attracting investments from global companies and multinational corporations. 

Notable SEZs in India:

The revision of Indias SEZ policy came with the enactment of the Special Economic Zone Act in 2005. Many EPZs were transformed into SEZs afterward including those located in Noida (Uttar Pradesh) Falta (West Bengal) Visakhapatnam (Andhra Pradesh) Chennai (Tamil Nadu) Cochin (Kerala) Santa Cruz (Maharashtra) Indore (Madhya Pradesh) along with Kandla and Surat (Gujarat). 

Since the implementation of this Act the Indian government has also given approvals for SEZ projects that developers need to propose to the Indian Board of Approval. The SEZ Rules from 2006 outline a procedure, for developing a proposed SEZ or setting up a unit within one. 

SEZs have evolved to encompass a range of zone categories, including Free Trade Zones (FTZs) EPZs, Industrial Estates (, IEs) Free Ports, Free Trade Warehousing Zones (FTWZs) and Urban Enterprise Zones, among designations. 

Incentives for setting up in an Indian SEZ 

Setting up a sourcing or manufacturing hub in an Indian Special Economic Zone (SEZ) comes with advantages:

• Duty Free Imports and Procurement; Companies, in SEZs can bring in goods from abroad and domestically without having to pay duties, which helps them in running and growing their businesses. 
• Income Tax Benefits; SEZ companies receive an income tax exemption on their export earnings for the initial five years as per Section 10AA of the Income Tax Act. This is followed by a 50 percent exemption for the five years along with a 50 percent exemption on reinvested export profits for another five years. (Please note that these benefits have a sunset clause that began on April 1 2020.) 
• Tax Benefits for SEZ Developers; Developers of SEZs are eligible for an income tax exemption on the revenue generated from developing SEZs for any ten years within a fifteen year period under Section 80 IAB of the Income Tax Act. (Developers benefits under this clause ended on April 1 2017.) 
• Exemptions, from Customs and Excise Duties; Operations authorized within SEZs by the Board of Approval (BoA) are relieved from customs and excise duties making development processes smoother. Special Economic Zones (SEZs) enjoy exemption, from Goods and Services Tax (GST). Certain state levies as per the IGST Act, 2017. 
• SEZ units are subject to Minimum Alternate Tax (MAT) which was reduced from 18.5 percent to 15 percent in September 2019. 
• The Dividend Distribution Tax was eliminated in February 2020 providing incentives for investments in SEZs. 
• SEZ units benefit from single window clearances for necessary government approvals at both state and federal levels simplifying the establishment process. 
• Some SEZ units are not required to pay electricity duty or tax on electricity sales in states. 
• The presence of customs officers within SEZs ensures trade processes and faster facilitation. 
• In states SEZ developers are offered land at discounted rates under the states Industrial Policy to encourage growth. 

Investors can explore advantages provided by SEZs that align with their business objectives in India. 

According to data, from the Ministry of Commerce and Industry a total of 1,096 units were registered within Indias SEZs between 2018 19 and 2020 21.  

Here are some important points to note:

• The value of exports, from Special Economic Zones (SEZs) rose from INR 228.40 billion (US$3.07 billion) in 2005 06 to INR 7,595.24 billion (US$102.24 billion) in the year 2020 21. 
• There was an increase in investments made in SEZs jumping from INR 40.355 billion (US$0.54 billion) in 2005 06 to INR 6,174.99 billion (US$83.12 billion) by the end of the year 2020 21. 
• The number of jobs created within SEZ units also saw a growth with employment figures rising from 134,704 individuals, in 2005 06 to 2,358,136 individuals by the end of the year 2020 21. 

Choosing an SEZ location:

There are Special Economic Zones (SEZs) for your company to consider, with a list accessible, on the Department of Commerce’s website. Choosing the one can be a challenging and stressful decision. 

For businesses directly engaged in sourcing or manufacturing in India selecting a site that can easily obtain the materials for production and is strategically positioned for exporting is crucial. 

Special Economic Zones and Warehousing Clusters in Delhi NCR:

In the Delhi National Capital Region (NCR) there are 14 SEZs situated in satellite cities such as Gurugram (formerly Gurgaon, Haryana state) and Noida. More information can be found here. 

Special Economic Zones and Warehousing Clusters in Mumbai:

In Mumbai and its vicinity there are around seven SEZs spread across Mumbai, Navi Mumbai and Thane. Further details are available here. 

Special Economic Zones and Warehousing Clusters in Bengaluru

Bengaluru ( Bangalore) has 18 SEZs, primarily located on the outskirts of the city. Additional information can be found here. 

Tamil Nadu leads with the number of SEZs at 40 followed by Karnataka with 31 Maharashtra with 30 and Uttar Pradesh with 14.Here is a list of Special Economic Zones (SEZs), in states:

List of operational SEZs in Gujarat:  

• Dahej SEZ Limited 
• Gujarat Industrial Development Corporation 
• Reliance Jamnagar Infrastructure Limited 
• Kandla SEZ 
• Surat Apparel Park 
• Surat Special Economic Zone 
• Zydus Infrastructure Private Limited 

List of operational SEZs in Karnataka:

• Biocon Limited 
• Cessna Business Park Pvt. Ltd. 
• GV Techparks Pvt. Ltd. 
• Karnataka Industrial Area Development Board (KIADB) 
• Manyata Embassy Business Park 
• RMZ Ecoworld Infrastructure Pvt. Ltd. 

List of operational SEZs in Maharashtra:

• Infosys Technologies Limited 
• Maharashtra Industrial Development Corporation Limited (MIDC) 
• SEEPZ Special Economic Zone  
• Serum Bio pharma Park  
• Syntel International Private Limited  
• Wokhardt Infrastructure Development Limited 

List of operational SEZs in Tamil Nadu:

• Coimbatore Hitech Infrastructure Pvt. Ltd. 
• Electronics Corporation of Tamil Nadu (ELCOT) 
• Mahindra World City Developers Limited
• MEPZ Special Economic Zone
• Shriram Properties and Infrastructure Private Limited
• Tata Consultancy Services Limited

List of operational SEZs in Uttar Pradesh:

• Noida Special Economic Zone (NSEZ)  
• Moradabad SEZ
• Moser Bear India Ltd.
• Ansal IT City and Parks Limited
• HCL Technologies Ltd.
• NIIT Technologies Limited SEZ
• WIPRO Limited
• Tata Consultancy Services LTD

Developing an SEZ in India 

Developers have the option to submit an application, to the Indian Board of Approval for establishing a Special Economic Zone (SEZ) in an area where one doesn’t currently exist. 

Various entities like companies, cooperative societies, individuals and partnership firms can apply by filling out Form A, which can be found on the commerce departments website dedicated to SEZs. 

The application form requires a range of information from details like the applicants name, address and personal information to specific details about the proposed SEZ such, as the type of land it will be situated on and how it will be financed. 

The size of land needed for the proposal determines the category of SEZ it falls under. There are types including Multi sector SEZ (requiring a minimum of 1000 hectares) Sector SEZ (requiring a minimum of 100 hectares) Free Trade and Warehousing Zone (FTWZ) (requiring a minimum of 40 hectares) and IT/ITeS/handicrafts/bio technology/non conventional energy/gems and jewelry SEZ (requiring a minimum of 10 hectares). 

Before receiving approval from the Board of Approval any proposal must first go through evaluation by the state government in which the proposed SEZ is located.Developers can benefit from incentives and perks such, as being exempted from customs and excise duties when developing Special Economic Zones (SEZs) for approved operations sanctioned by the Board of Approval (BOA). Additionally they are eligible for Income Tax exemption on income generated from SEZ development business for a period of 10 years within a span of 15 years as per Section 80 IAB of the Income Tax Act. It is important to note that the Sunset Clause for Developers has been, in effect since April 1 2017.