EPZ and Tax Incentives

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EPZ and Tax Incentives are interconnected for the purpose behind the setting up of EPZs in a country is to offer Tax Incentives to them. The Tax Incentives offered to EPZs in India are the best and this is one of the reasons that the number of EPZs in the country is increasing.

Export Processing Zones are specified areas in a country where quotas and tariffs are eliminated in the hope of attracting foreign investments and new business. It can also be defined as production centers which is labor intensive and which involve the import of raw materials and the export of finished products. The government of India offers many tax incentives to the Export Processing Zones that have been set up in the country. The various Tax Incentives provided to EPZs in India are 100% exemption from income tax for a period of five years and after that 50% income tax exemption for a period of two years.
Further the various Tax Incentives offered to EPZs in India are that 100% foreign direct investments (FDI) are allowed in the manufacturing sector through the automatic route and the units within the EPZs have the facility to hold foreign exchange receipts up to 100% in the account of Exchange Earners Foreign Currency. Also the various Tax Incentives offered to Export Processing Zones in India are that the units in the EPZs are allowed commercial external borrowings without any maturity restrictions. The various Tax Incentives provided to EPZs in India are that foreign direct investment (FDI) up to 100% is allowed in the units within the EPZs for providing telephone services in the EPZs and exemption from paying customs duties on the import of raw material, capital goods, and consumables spares.

The various Tax Incentives offered to EPZs in India are that the units within the EPZs are exempted from paying service tax and central sales tax. Further the various Tax Incentives given to the EPZs in India are that the units within the EPZs do not have to pay any central excise duties on the procurement of raw materials, consumable spares, and capital goods from the local market. Also the various Tax Incentives given to EPZs in India are that the developers of the EPZs are exempted from paying duties on the import of goods for the operation, development, and maintenance of EPZs. The various Tax Incentives provided to the developers of EPZs in India are that they are exempted from paying income tax for a period of ten years and they are also exempted from paying service tax. EPZ and Tax Incentives thus are seen go together.

The various Export Processing Zones in India are:
  • Visakhapatnam Export Processing Zone (VEPZ), Visakhapatnam, Andhra Pradesh
  • Santa Cruz Electronic Export Processing Zone (SEEPZ), S. Cruz, Maharashtra
  • Kandla Free Trade Zone (KAFTZ), Kandla, Gujarat
  • Noida Export Processing Zone (NEPZ), Noida, Uttar Pradesh
  • Falta Export Processing Zone (FEPZ), Falta,West Bengal
  • Cochin Export Processing Zone (CEPZ), Cochin, Kerala
  • Madras Export Processing Zone (MEPZ), Madras, Tamil Nadu
The Indian government must continue to provide better Tax Incentives to the EPZs in the country for this will encourage the setting up of more EPZs in India. This in its turn will help in the growth and prosperity of the country.