Why some people are opposing special economic zones?

Answer 1

1. Land Grabbing at very low prices.

2. If SEZ built on agricultural land the farmers will loose their livelihood as they are not skilled laborers it would to tough to relocate them to other jobs. Already Farmers are having very bad days in India, one of the leading agriculture countries.

3. Since the companies that operate under SEZ enjoy a lot of tax holidays it would create a burden on the finance ministry as tax collected would be less.

4. Huge downward impact on Tax: GDP ratio & the common man have to pay the price of it.

Answer 2

Some people oppose special economic zones due to concerns about environmental degradation, labor exploitation, displacement of local communities, and unequal distribution of benefits. They argue that these zones can lead to increased social inequality and loss of sovereignty over resources. Additionally, critics suggest that special economic zones may create a race to the bottom in terms of labor standards and regulations.

Answer 3

The purpose of special economic zones or area (SEAs) is to encourage investment and production by select jurisdictions. These jurisdictions will offer tax, subsidies, and other "carrots," to set up operations in those areas. Opposition to SEAs is due to the semblance of impropriety, favoritism, and unequal treatment by the government towards certain firms, while not applying the benefits to all. The second issue of concern is that an SEA may not increase the quality of life in their communities or reinvest into them,

Answer 4

Advantages

• 15 year corporate tax holiday on export profit - 100% for initial 5 years, 50% for the next 5 years and up to 50% for the balance 5 years equivalent to profits ploughed back for investment.

• Allowed to carry forward losses.

• No licence required for import made under SEZ units.

• Duty free import or domestic procurement of goods for setting up of the SEZ units.

• Goods imported/procured locally are duty free and could be utilized over the approval period of 5 years.

• Exemption from customs duty on import of capital goods, raw materials, consumables, spares, etc.

• Exemption from Central Excise duty on the procurement of capital goods, raw materials, and consumable spares, etc. from the domestic market.

• Exemption from payment of Central Sales Tax on the sale or purchase of goods, provided that, the goods are meant for undertaking authorized operations.

• Exemption from payment of Service Tax.

• The sale of goods or merchandise that is manufactured outside the SEZ (i.e, in DTA) and which is purchased by the Unit (situated in the SEZ) is eligible for deduction and such sale would be deemed to be exports.

• The SEZ unit is permitted to realize and repatriate to India the full export value of goods or software within a period of twelve months from the date of export.

• "Write-off" of unrealized export bills is permitted up to an annual limit of 5% of their average annual realization.

• No routine examination by Customs officials of export and import cargo.

• Setting up Off-shore Banking Units (OBU) allowed in SEZs.

• OBU's allowed 100% income tax exemption on profit earned for three years and 50 % for next two years.

• Exemption from requirement of domicile in India for 12 months prior to appointment as Director.

• Since SEZ units are considered as 'public utility services', no strikes would be allowed in such companies without giving the employer 6 weeks prior notice in addition to the other conditions mentioned in the Industrial Disputes Act, 1947.

• The Government has exempted SEZ Units from the payment of stamp duty and registration fees on the lease/license of plots.

• External Commercial Borrowings up to $ 500 million a year allowed without any maturity restrictions.

• Enhanced limit of Rs. 2.40 crores per annum allowed for managerial remuneration.

Disadvantages

• Revenue losses because of the various tax exemptions and incentives.

• Many traders are interested in SEZ, so that they can acquire at cheap rates and create a land bank for themselves.

• The number of units applying for setting up EOU's is not commensurate to the number of applications for setting up SEZ's leading to a belief that this project may not match up to expectations.