India EPZ and Sri Lanka EPZ

Overall Rating: star ratingstar ratingstar ratingstar ratingstar rating[0/5]Total Votes [  ]  
Rate this page:
The concept of Export Processing Zone involves the establishment of an industrial area or an enclave that has its commercial code. The India EPZ and Sri Lanka EPZ have ameliorated the incidence of quantitative restrictions, customs duties, tariffs and high exchange rates to facilitate the exporters.

The Export processing Zones offer various significant fiscal concessions to the existing companies established inside the zones. The companies usually form industrial clusters and engage in the up gradation of their standards with the exchange of skilled human resource, trained through both government as well as private institutes set up within the zones, technical know-how and data transfer.
The companies are allowed to enter into joint ventures, distribution agreements, manufacturing agreements, and thus achieve external economies of scale in gaining competitive advantage and attracting foreign direct investments. The Export Processing Zones are facilitated with single window system, which serves to cope with the hazards of different kinds of corruption.

India EPZ Policy and Sri Lanka EPZ Policy

  • The individual EPZ policies of India EPZ and Sri Lanka EPZ, are developed to fight against certain biases like anti-export bias followed under the Import Substitution Industrial (ISI) policy in India and to attract FDI for the export sector in Sri Lanka

  • Indian government has not formulated any separate EPZ Act for the establishment and working of EPZs whereas the Sri Lankan Government has formulated the BOI Act for the EPZs in Sri Lanka

  • The total number of EPZs in India and that in Sri Lanka are nine

  • The prime motive behind the establishment of the EPZs in India and Sri Lanka was to attract more FDI and overall development of the economy through the creation of more industrial enterprises

  • All the EPZs in India are managed by the Indian Ministry Of Commerce and the Sri Lankan government manages the EPZs in Sri Lanka through the BOI Act

India EPZ and Sri Lanka EPZ Incentives

The concept of EPZ was not very popular in India before 1981, due to the lack of income tax concessions and other incentive packages. The norms for the exemption of export duties varied with the different EPZs in India. Exemption from sales tax levied by both the center and the states individually was also not provided to all the EPZs in India. However, the year 1991 proved to be a boon for the promotion of EPZs in India. Since then new facilities are being constantly implemented by the government for the up gradation of the EPZs in India. Some of such facilities are as follows:
  • The duty on both DTA sales and sale of rejects have come down to 50 % respectively, the DTA sales are charged only 50 % of the
  • Customs Duty whereas the sale of rejects has come down to 50 % of the duty charged earlier
  • The EPZ s in India are offered the choice of Export Promotion Capital Goods Scheme
  • The amount of DTA sales has been increased for the zones with regard to raw materials on complying with all the export obligations
  • Electronic hardware manufacturing firms have been allowed to market near about half of their manufactured commodities in the domestic market and the software manufacturing firms are allowed to carry on DTA sales through Internet
  • The firms producing goods or commodities for small scale industries are liberated from the acquisition of industrial licensing
  • 100 % FDI inflow for Internet Service Providers who do not offer gateways
  • 100 % FDI inflow for reserved commodities belonging to the small scale sector
  • Re-export of commodities that were imported against loans
  • Reduction of unrealized export bills but not more than 5 %
  • Complete liberty with regard to subcontracting activities in India and in foreign countries
  • 100 % exemption from the payment of income tax for a period of 5 years initially which is subsequently reduced as per the Section 10 A of Income Tax Act
  • Exemption from the payment of service tax
  • Exemption from the payment of central excise duty with regard to the acquisition of consumable spares and capital goods
The Sri Lankan EPZs are also provided with both fiscal and non-fiscal incentives, which can be grouped as follows:
  • The textile sector in the Sri Lankan EPZs have been allowed 10 % DTA sale
  • The EPZs units are facilitated with joint management labor consultative councils
  • The EPZ units in the backward zones are allowed 2 years extra tax holidays than the EPZs in the developed zones
  • Concessions are also allowed for the EPZs in the backward areas with regard to lease premium per acre
  • The BOI earlier offered interest free loans for a maximum of 20 million for the establishment of factories in the Koggala region.
  • As early as 1991 the EPZs in Sri Lanka were offered certain significant tax benefits like the non resident share holders of the EPZs were not required to pay any taxes on dividends
  • Transfer of shares from the residents to the non residents can be done without the payment of taxes
  • Formulation of Foreign Currency Banking Units Scheme to assist the EPZ units to avail huge amount of foreign currency credit Exemption from the payment of turn over tax as well as excise duty
India EPZ and Sri Lanka EPZ serve to develop the industries in both the countries by providing a platform for different internationally manufacturing units, assisting the private sector to incline more towards export activities and so on.