Government Benefits & Incentives for Foreign Companies for Setting Up of a Corporation in a Special Economic Zone in India: India Business Entry

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Introduction to Setting-Up Business in India or India Business Entry through FDI in India
The country identified the Special Economic Zone (SEZ) region geographically. A country’s national borders are where special economic zones are found. The role of the government in attracting investments into the country is expected to be anchored on an encouraging regulatory environment, physical infrastructure, and the implementation of policies by the government in those areas to promote manufacturing in India and create employment opportunities by setting up businesses in India.
It means “special economic zones are a particular area within the territory of a particular country that is different from the other corporate legal jurisdiction of that country. Where the government provides a tax discount and taxation benefits in India. Or even tax-free for employment and to attract investors for the development. When the government offers a tax break. Or even tax-free to entice investors for growth.

Objectives of Special Economic Zones:
They developed the Special Economic Zones to reduce economic instability in the country. Due to the business regulations and trade laws, there are many objectives for SEZs.
• The special economic zones foremost objectives are to:
• Increase exports of goods and services.
• To generate employment
• To establish infrastructure facilities.
• To develop additional economic activity
• To boost foreign investments

Benefits from the Government for Special Economic Zones:
• Generate foreign development investment and entice international investors to abolish or decrease taxes.
• To achieve a trade balance and increase exports. And should also reduce imports from developed countries.
• To attain new heights in exports, employment, and investment.
• For the improvement of administrative efficiency.
• Improving the ease of doing business.

The Government Initiatives for the Special Economic Zones:
Establishing businesses in SEZs is rewarded with incentives from the government. Special Economic Zones (SEZs) are places set apart inside a nation that provide certain amenities and incentives to draw in domestic and foreign investment. The purpose of SEZs is to encourage growth in industrialization, improve exports, attract technology transfer, encourage innovators, and generate employment opportunities. While exact amenities and incentives differ from one country to the next, they usually find the following characteristics in SEZs:
• Versatile Labour Laws: Compared to the rest of the nation, SEZs frequently have more permissive labour laws. This may entail liberal employment regulations, such as the acceptance of fixed-term contracts, longer workdays, and fewer limitations on workers or labor unions.
• Single-Window Clearance: SEZs often provide a streamlined and accelerated approval procedure for establishing and running businesses. Single-window clearance systems lower administrative barriers by allowing investors to receive numerous licenses, permits, and approvals from a single authority.
• Tax Benefits: Tax advantages for the companies that are located in special economic zones are businesses operating within SEZs, frequently receiving tax breaks and incentives. These can include exemption from value-added tax (VAT) or goods and services tax (GST), reduced or waived customs charges on imported capital goods and raw materials, and income tax vacations for a set duration.

Special Tax Exemptions for Special Economic Zones:
• GST (Goods & Services Tax)
• Income Tax
• Capital Gains Tax
• Custom Duties
• Local Taxes and Levies
• Import and Export Taxes
• Protection of Intellectual Property: To promote innovation and technological transfer, SEZs may have improved intellectual property protection procedures. The tougher enforcement of the zone’s copyright, patent, and trademark rules may fall under this category.
• Under section 115JB of the Income Tax Act, exemption from the Minimum Alternate Tax (MAT). (Retracted as of 1.4.2012.)
• Section 10AA of the Income Tax Act grants Special Economic Zone (SEZ) units a comprehensive income tax exemption on export income for an initial period of five years. Subsequently, there is a 50% exemption for the subsequent five years, along with a 50% rebate on the exported profits for the following five years.
• Borders and Import-Export Protocols: SEZs often include streamlined customs and import-export procedures to promote the efficient flow of commodities. This can involve less stringent import-export regulations, quicker clearance timeframes, and simplified documentation procedures.
• No need for any licenses for imports and exports.
• The FDI (Foreign Direct Investment) is 100% allowed Because it tries to create a long-lasting presence in the foreign market, FDI is often a long-term investment. To realize profits over a long period, the investor contributes significant amounts of time, money, and expertise.
• Import and domestic procurement of products Duty-free for the growth, execution, and upkeep of SEZ units.
• Exclusion from the Service Tax, and the State Sales Tax, Central Sales Tax. These have already been absorbed into GST, and supplies to SEZs are now deducted from tax under the IGST Act of 2017.
• Local Taxes and Levies: SEZs may provide exemptions from or reductions to several local taxes and levies, including transfer tax, stamp duty, and land use tax. These exemptions or deductions help reduce operational costs for businesses.

Advantages of Special Economic Zones:
• Tax Discount or tax-free
• All policies suitable for investment
• Flexible customs and labour regulation
• Relaxation on export and imports

Conclusion:
It is important to remember that the particular advantages and incentives may change depending on the location, industry, and other aspects of the SEZ. The establishment of businesses in Special Economic Zones (SEZs) is encouraged by several privileges and incentives offered by the Indian government. These incentives are designed to increase exports, encourage domestic and international investment, and promote growth in the economy.
Authored By: Adv. Anant Sharma & Chandana Surthi

 

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