A Special Economic Zone (SEZ) is a demarcated area with quality infrastructure. It is exempted from all taxes and duties to enable manufacturing and trade in a hassle free environment for export production. All laws, rules, circulars, directions of the State are valid and applicable to SEZs.

Any Company (private / public / joint sector) or State Government or its agencies and foreign companies can set up SEZ. The SEZ Act 2005 supported by SEZ Rules 2006 came into effect from 10-2-2006.

In the case of a SEZ, 100% of land is to be acquired by consent and there is no compulsory acquisition of land. This besides R & R Policy would be implemented as per Government of India guidelines. The SEZ Act provides for State Governments to grant exemption from State taxes, levies and duties. Further, the various State Acts delegate powers to the Development Commissioner.

Primary Objectives of the SEZ Act

The primary objectives of the SEZ Act are as follow :
Generation of additional economic activity Promotion of exports of goods and services
Promotion of investment from domestic and foreign sources Creation of employment opportunities and development of infrastructure facilities

SEZ Policy

The Special Economic Zones (SEZ) Policy was announced in April 2000 with the objective of making the SEZs an engine of economic growth, supported by quality infrastructure and an attractive fiscal package both at the Central and State level with a single window clearance. The SEZ concept recognizes the issues related to holistic economic development and provides for development of self-sustaining industrial townships so that the increased economic activity does not create pressure on the existing infrastructure.

A comprehensive Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 to instill confidence in investors and signal the Government’s commitment to a stable SEZ policy regime. The key objectives include imparting stability to the SEZ regime, thereby generating greater economic activity and employment through the establishment of SEZs. The Act received Presidential assent on the 23rd of June, 2005. The SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing simplification of procedures and single window clearance on matters relating to Central and State Governments. As a result of this Act and Rules coming into force, it was envisaged that the SEZs would attract a large flow of foreign and domestic investment in infrastructure and production capacity leading to generation of additional economic activity and creation of employment opportunities.

State Policy for SEZs

To instill confidence in investors & signal the Government’s commitment to a stable policy regime, the State Policy for SEZs has been formulated in consonance with Central SEZ Act 2005 & Rules 2006.

Salient Features of State SEZ Policy

Single Point Clearance. No compulsory acquisition of land. SEZs have to be established in waste, kharab, dry & single crop land.
R & R plan for project affected persons as per National R & R Policy 2007. Labour laws delegated to Development Commissioner of SEZ.
Provision for Infrastructural Facilities. Fiscal benefits to SEZs.
Highest level Committee under the Chairmanship of Chief Secretary to sort out the implementation problems of SEZs .

Incentives / facilities available under State SEZ Policy

Refund of VAT for purchase of goods excluding petroleum products. Exemption of Stamp Duty.
Exemption of Electricity Tax. Entry Tax Exemption.
Capital Investment Subsidy for CETP. (Max Rs 1.00 Crore)

Minimum Area Requirement for setting up SEZ

Type of SEZ Hectares
Multi Product 500
Product Sector Specific/Port/Airport/Multi Services 50
Agro Based BT/Gems & Jewellery/Non Conventional Energy 10
[ 50,000 sq.meter for Gems & Jewellery ]
[ 40,000 sq.meter for BT/Agro - based/Non-conventional Energy ]
Information Technology (IT) Built Up Area (sq.meter)
1. Bangalore (1.00 Lakh)
2. Tier-2 Cities (50,000)
3. Ohter cities (25,000)

Processing & Non Processing Areas

Areas falling within the SEZs are demarcated as Processing & Non-processing Areas
Processing Area : Area for setting up units for activities, being the manufacture of goods, or rendering services.
Non-processing Area : Area for activities other than those specified in the processing area like Housing/Service apartments, Shopping Arcade, Multiplex, Hospitals, Schools, Hotel, Play ground, Recreational facilities, Swimming pool etc.

EOUs in karnataka

Amendment Rules

Application Procedures for approval of SEZ

FAQs pertaining to SEZs

Formal-Approvals

Operational SEZS

Notified SEZs