A special Economic zone (SEZ) is a geological region that monetary laws which are more noninterventionist than the usual monetary laws in the country. The fundamental motto behind this is to increase foreign investment and increase exports. SEZ is recognized for diversity of reasons like, boost in investment and augment job opportunities and technical acquisition and fetch certain tax improvements.
SEZ policy in India was preceded on 1/4/2000 with a vision to offer a globally aggressive and hassle free atmosphere for exports and make the domestic venture and firms globally viable. In SEZ we can avail 100% foreign direct investments (FDI) for the industrialized sector, and no cap on foreign investments for small scale industries (SSI) articles. We can also avail the take the advantage of income tax benefit under section 80 of the Income Tax Act, this involve that the profits earned by the division is excused for 3 years and 50% exception for the next 2 years. Duty free import of domestic goods can be done for the development and maintenance of the SEZ. Even the exemption from Service tax and CST is available. But normal labor laws are pertinent which are enforced by the state, although state Governments have abridged the procedures.
There are various advantages of SEZ as they are good from the point of vision of growth and development. It increases income level of citizens, persuades competition and lowers labor costs. SEZ magnetizes FDI and exchange earnings. Also FDI would make sure for a significant ownership, in times of adverse claims pay put, it is only through the FDI route that foreign stake holders would inculcate capital to come over the adverse circumstances. It helps to create a lot of job opportunities in the market. Also when SEZ's become a triumph it acts as a good economic model for the policy makers to imitate.
But at the same time it has its own disadvantages like companies would like to mercely move to SEZ to take advantage of the tax concessions provided, which can lead towards a significant revenue loss to the government.
So overall SEZ plea to almost all developing countries like India but they would not work if the country has no clear vision or strategy to move forward. Such Countries can execute even better than now if the public, private, people and government administrative sector all work together in coordination with each other in harmony.