The union or state governments may grant cash subsidies or finance a part of the fixed capital cost of promoted projects. Various state governments have designated areas according to their levels of development. The level of incentives provided by a state varies and is generally larger for investments in backward areas and state-promoted industries.
Various power tariff incentives are also extended by state governments. A “green channel facility” has been introduced in some states to expedite the processing of applications.
Most of the incentives are granted as a package and include both tax and non-tax incentives. These incentives are generally conferred with socio-economic objectives in mind, e.g. export promotion, development of backward areas, infrastructure, growth of a particular industry or employment generation.
Free zonesThe Special Economic Zones Act 2005 was enacted in order to provide an internationally competitive environment for exports and a stable policy framework with minimum regulation. The provisions of the Special Economic Zones Act also apply to existing SEZs. This Act includes provisions on the following:
Any person who intends to establish an SEZ must make a proposal to the relevant state government or the Board of Approval. If the state government intends to establish an SEZ, its proposal is forwarded directly to the Board of Approval. Approval of the federal government is granted on terms and conditions as specified in the letter of approval. A state government or any other person granted approval by the federal government for the establishment of an SEZ is referred to as a “developer”.
Any person or entrepreneur intending to establish a business for carrying on authorized operations in an SEZ must submit a proposal to the relevant authorities. A business, which is described as an “undertaking” in the Special Economic Zones Act, means an undertaking to be established by an entrepreneur and also includes an existing undertaking, an offshore banking undertaking and an undertaking in an IFSC, whether established before or after the enactment of the Special Economic Zones Act.
Once approval has been granted for the establishment of a business or undertaking in the SEZ, the entrepreneur may undertake such operations, as authorized by the letter of approval. The letter of approval may be cancelled if the authorities have any reason to believe that the entrepreneur has persistently contravened any of the terms and conditions subject to which the approval was granted.
The entrepreneur may establish an offshore banking undertaking in an SEZ by making an application to the Reserve Bank of India. The federal government may also consider establishing an IFSC in any of the SEZs.
Licensed manufacturing warehousesThe facility for warehousing of imported goods in Customs Bonded Warehouses, without payment of customs duty otherwise leviable on import, is permitted under the Customs Act, 1962. Apart from specific provisions in the Act (particularly under Chapter IX), certain regulations have been also issued, i.e. the Warehoused Goods (Removal) Regulations, 1963 and the Manufacture and Other Operations in Warehoused Regulations, 1966. Basically, goods after landing are permitted to be removed to a warehouse without payment of duty and duty is collected at the time of clearance from the warehouse. The law lays down the time period up to which the goods may remain in a warehouse, without incurring any interest liability and with interest liability.
Applications for licences for Private Bonded Warehouses are classified into two categories, i.e. storage of sensitive goods such as liquor, cigarettes, foodstuffs, consumables, etc., and other non-sensitive goods.
