Special Economic Zones (SEZs) remain pivotal to India’s economic strategy, offering liberalized regulatory environments, tax incentives, and modern infrastructure to attract both domestic and foreign investment. Governed under the Special Economic Zones Act, 2005, with supporting SEZ Rules, 2006, and overseen by a multi-tier framework including the Board of Approval (BoA), zonal Approval Committees, and Development Commissioners, SEZs continue evolving as engines of export promotion, employment, and regional development
Legal Backbone and Governing Bodies
The SEZ Act & Rules
- The Special Economic Zones Act, 2005, ratified on 23 June 2005 and operational from 10 February 2006, laid the statutory foundation for SEZ development in India .
- It defines SEZ governance, incentive structures, processes for establishment, and regulatory mechanisms including the formation of zonal authorities and roles of Development Commissioners .
The Board of Approval (BoA)
- The SEZ Board of Approval, a 19-member inter-ministerial body chaired by the Secretary of Commerce, centralizes SEZ approvals including new proposals, authorizations, and foreign collaborations operating via majority consensus.
Zonal Regulations
- Once BoA approves and the Central Government notifies an SEZ, an Approval Committee headed by the local Development Commissioner manages rezoning of land, unit authorizations, and escalating issues.
- Each SEZ is managed by its own corporate SEZ Authority, led by its Development Commissioner.
Core Incentives and Objectives
SEZs bolster India’s economic aims through:
- Trade and export boosts via duty-free imports/domestic procurement.
- Tax exemptions—100% export-income exemption for five years, 50% for the next five, and incentives under Section 10AA of the Income Tax Act.
- GST advantages, with SEZ-related supplies zero-rated under IGST.
- Single-window clearances for central and state permissions.
- 100% FDI permitted in most sectors.
- Repatriation of profits, streamlined customs documentation, and no licensing needs .
SEZ Highlights Across India
- GIFT City, Gujarat: A multi-sector SEZ housing India’s first IFSC, regulated by the International Financial Services Centres Authority. It’s governed by the SEZ Act and offers tax and infrastructural benefits.
- Dholera Special Investment Region (DSIR), Gujarat: Enacted under the Gujarat Special Investment Region Act of 2009, with infrastructure managed by DSIRDA under an SPV with NICDC.
- Mangaluru SEZ, Karnataka: A 1,600-acre industrial park managed by MSEZL, a consortium including ONGC, IL&FS, KIADB, and KCCI.
Recent Developments & News
Great strides have been made lately:
- New semiconductor-focused SEZs approved: On 9 June 2025, BoA greenlit SEZs for Micron Semiconductor Technology India and Aequs Group in Gujarat and Karnataka, signaling a boost to India’s semiconductor and electronics manufacturing ambitions.
- AI-first SEZ in Chhattisgarh: RackBank Data Centers plans a ₹1,000 crore AI-specialized SEZ, spanning six acres, to host high-density data centers and potentially global tech players like Google and Microsoft.
- Nagpur’s MIHAN SEZ: Export growth from ₹1,786 crore to ₹3,961 crore in FY 2024–25, led by pharmaceuticals, aircraft components, and software firms – signaling continued export momentum.
- Peenya Industrial Area gains SIR status: On 9 June 2025, Karnataka declared Bengaluru’s Peenya Industrial Area a Special Investment Region under its 2022 Act. KIADB will manage infrastructure improvements and a new regional development authority. The move is expected to generate 400,000 jobs.
- Major investments in Ganjam, Odisha: PM Modi-backed ‘Viksit Bharat’ initiative led to ₹28,084 crore invested, including in Tata Steel’s SEZ covering green hydrogen, solar, LNG, agro-processing projected to produce 15,455 jobs.
Challenges & the Way Ahead
Despite solid foundations, SEZ frameworks face:
- Land acquisition resistance (e.g., communities opposing MSEZ expansions).
- Underutilization and need for greater domestic tariff area integrations.
- Phasing out tax breaks, prompting a shift toward infrastructure-led and tech-centric incentives .
However, the emergence of AI-driven SEZs, semiconductor hubs, and green energy zones marks a decisive pivot toward high-value and future-led sectors.
Conclusion
Backed by a robust legal framework like the SEZ Act 2005 and multi-tier governance via BoA and zonal authorities, India’s SEZ model continues to expand its functionality. New era investments in AI, semiconductors, and green energy, alongside revitalization of aging industrial zones, reinforce SEZs as critical catalysts for economic transformation delivering employment, infrastructure, and export gains aligned with India’s 2047 vision.
Source: sezindia.gov.in
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