India EPZ and Bangladesh EPZ

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India EPZ and Bangladesh EPZs have been developed in accordance with the basic idea of Export Processing Zones. The EPZs are now popularly referred to as SEZs or Special Economic Zones.

Both India EPZ and Bangladesh EPZ serve to reduce the burden of taxes and duties for firms and companies included within these zones. They have scaled down the burden of quantitative restrictions, different kinds of duties, high incidence of exchange rates and tariffs.

The EPZs provide fiscal concessions and assist the companies in forming industrial clusters to up grade their standards with the movement of skilled labor and exchange of technical know-how, transfer of information.
The EPZs are facilitated with the inflow of cheap labor and serves to create a platform for the betterment of internationally mobile manufacturing groups. The labor force in these zones are benefited immensely by the various training institutes set up by the state as well as central government and by private institutes too. The EPZs have helped the promotion of export activities within the indigenous private sector and attracted the attention of the government to organize the private sector through more effective regulatory activities and increase in administrative efficiency. The EPZs have made the collaboration of different companies smoother and thus broadened the scope for the formulation of more joint ventures at present and in the near future. The firms are now able to successfully accomplish economies of scale to enjoy competitive advantage. The zones have helped in effecting more distribution as well as manufacturing agreements. The zones liberate the existing companies from the hazards of multiple windows and thus guarantee freedom from corruption.

India EPZ and Bangladesh EPZ Policy: The individual EPZ policies of India EPZ and Bangladesh EPZ, have been formulated to fight against significant biases such as anti-export bias developed through Import Substitution Industrial (ISI) policy and to increase the inflow of FDI for exports India does not have any separate EPZ Act containing guidelines for the formation and management of EPZs whereas Bangladesh has its own BEPZA Act to provide guidelines for the establishment of EPZs in the country. The total number of EPZs in India is nine, while the number of EPZs in Bangladesh is six. The EPZs in India were created in a single phase and that of Bangladesh was developed in a phased manner. The idea behind the development of EPZs in Bangladesh was to create more avenues to earn foreign exchange and increase employment opportunities, incorporation of advanced technologies etc. Every EPZs in India is taken care of by the Indian Ministry Of Commerce whereas the EPZs in Bangladesh are managed in accordance with the BEPZA Act.

India EPZ and Bangladesh EPZ Incentives:

The popularity of EPZs in India gained force after 1981. Earlier the EPZs suffered account of the absence of income tax concessions as well as incentive packages. Moreover, the rules for tax exemption especially export duty was not constant for all the EPZs. Even sales tax exemption was not allowed to all the EPZs in India. The constant modifications and up gradations with regard to the EPZs policies through the years have led to the incorporation of significant facilities such as:
  • Increased DTA sales in lieu of raw materials in case all the export obligations are fulfilled
  • EPZs have the option to select the Export Promotion Capital Goods Scheme
  • The electronic hardware firms are permitted to carry on the sales of the commodities produced by them in the local market
  • Customs Duty with regard to DTA sales have been halved
  • The duty levied on the sale of rejects have also been reduced
  • Software Companies are now permitted to carry on their marketing activities through the Internet
  • 100 % inflow of Foreign Direct Investment with regard to reserved goods required by the small scale sector
  • Unrealized export bills are allowed a maximum reduction of 5%
  • Subcontracting activities are permitted in India as well as in foreign countries
  • Companies are no longer required to pay central excise duty for the purchase of consumable spares and capital goods
  • Exemption are allowed with regard to income tax payment
  • 100% flow of Foreign Direct Investment with regard to ISPs without gateways
The government of Bangladesh formulated BEPZA Act to boost the economy through the establishment of EPZs in the country. The EPZS in Bangladesh have facilitated the hassle free as well as fast sanctioning of projects. BEZPA offers significant services as for example:
  • Issuance of Export Permits
  • Provides Water Connection
  • Aids in acquiring Telephone Connection "" Issuance of Work Permits for foreign citizens
  • Arranges for Electricity
  • Registering the companies as per the factory act
  • Issuance of Import Permits
The units inside the EPZs are offered large number of fiscal benefits as the tax liability as been substantially reduced. Some of the significant fiscal benefits involve:
  • Exemption from the payment of taxes on the income received through dividends by the share holders residing outside the EPZs, during the time when the company was allowed tax benefits and in case of reinvestment Exemption
  • Land transfers within the EPZs do not require the payment of stamp duties
  • Companies are exempted from the payment of import duties on any kind of commodity
  • EPZS allow accelerated depreciation on machine tools as well as plants
  • Units within the EPZs are exempted from the payment of customs duty
  • Exemption is also available in case of value added tax and other taxes provided in sections 7(e) and 7(f)
  • EPZs located in backward areas enjoy 50% subsidy on land as well as on factory rent
  • Cash Incentives allowed in case of Eshwardi, Uttara and Mongla to agro based industries
The Bangladesh government has also arranged for certain non-fiscal benefits for the EPZs in the country which mainly include exemption from compliance with certain laws like:
  • The Excise and Salt Act
  • The Industrial Dispute Act
  • Foreign Exchange Regulation Act
  • Employment of Labor Act
  • The Building Construction Act
  • The Income Tax Ordinance
  • The land Development Tax Ordinance