Definition
Special Economic Zone (SEZ)
A Special Economic Zone is a designated enclave treated as foreign territory for trade and duties, offering tax and regulatory benefits to boost exports.
SEZs are demarcated areas where businesses enjoy a simplified regulatory regime and, historically, tax incentives, with supplies into them treated as zero-rated under GST and exempt from certain customs duties on inputs. The goal is to create globally competitive export hubs.
Over time, the value of SEZ income-tax holidays has been phased down, and the government has explored reforms to repurpose SEZs for both export and domestic sales. They remain significant for sectors like IT services and manufacturing aiming at world markets.
Related terms
- Customs DutyCustoms duty is the tax levied on goods imported into, or in some cases exported from, India, administered under the Customs Act.
- PLI SchemeThe Production Linked Incentive scheme offers financial incentives to manufacturers based on incremental sales of goods made in India, to boost domestic production.
- Zero-Rated Supply (GST)A zero-rated supply under GST is one taxed at a nil rate while still allowing the supplier to claim input tax credit, applied mainly to exports and SEZ supplies.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.