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International Trade (Part – II)

📆 October 19, 2024

Total Questions: 50

31. The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: [I.A.S. (Pre) 2010]

1. Development of infrastructure facilities.

2. Promotion of investment from foreign sources.

3. Promotion of exports of services only.

Which of the above are the objectives of this Act?

Correct Answer: (a) 1 and 2 only
Solution:The Special Economic Zone (SEZ) policy in India first came into inception on 1 April, 2000. Its prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports. The idea was to promote exports from the country and realizing the need that level playing field must be available to the domestic enterprises and manufacturers to be competitive globally.

Rules Pertaining to SEZs in India

  • A designated duty-free enclave is considered as a territory outside the customs jurisdiction of India for authorized operations within the Special Economic Zone (SEZ).
  • Duty free import and domestic procurement of goods for the development, operation, and maintenance of your company/SEZ unit.
  • No import license is necessary, and both manufacturing and service activities are permitted.
  • 100 percent income tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for the first five years, 50 percent for the next five years thereafter and 50 percent of the ploughed back export profit for the next five years.
  • Exemption from the Goods and Service Tax (GST) and levies imposed by the state government (supplies to SEZs are zero rated under the IGST Act, 2017, meaning they are not taxed).
  • Units within the SEZ must demonstrate Positive Net Foreign Exchange over a cumulative period of five years from the start of production.
  • Domestic sales are subject to full customs duty and adhere to the current import policy.
  • Minimum Alternate Tax (MAT) must be paid by SEZ units.
  • Single window clearances for all state and federal government approvals.
  • SEZ units have the liberty to engage in subcontracting.
  • Routine inspections of export/import cargo by customs authorities are not required.
  • SEZ Developers/Co-Developers and Units are entitled to direct and indirect tax benefits as stipulated in the SEZs Act of 2005.

32. Which of the following are the objectives of the SEZAct, 2005? [B.P.S.C. (Pre) 2022]

1. Generation of additional economic activity

2. Promotion of exports of goods and services

3. Creation of employment

Correct Answer: (b) 1, 2 and 3
Solution:The Special Economic Zone (SEZ) policy in India first came into inception on 1 April, 2000. Its prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports. The idea was to promote exports from the country and realizing the need that level playing field must be available to the domestic enterprises and manufacturers to be competitive globally.

Rules Pertaining to SEZs in India

  • A designated duty-free enclave is considered as a territory outside the customs jurisdiction of India for authorized operations within the Special Economic Zone (SEZ).
  • Duty free import and domestic procurement of goods for the development, operation, and maintenance of your company/SEZ unit.
  • No import license is necessary, and both manufacturing and service activities are permitted.
  • 100 percent income tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for the first five years, 50 percent for the next five years thereafter and 50 percent of the ploughed back export profit for the next five years.
  • Exemption from the Goods and Service Tax (GST) and levies imposed by the state government (supplies to SEZs are zero rated under the IGST Act, 2017, meaning they are not taxed).
  • Units within the SEZ must demonstrate Positive Net Foreign Exchange over a cumulative period of five years from the start of production.
  • Domestic sales are subject to full customs duty and adhere to the current import policy.
  • Minimum Alternate Tax (MAT) must be paid by SEZ units.
  • Single window clearances for all state and federal government approvals.
  • SEZ units have the liberty to engage in subcontracting.
  • Routine inspections of export/import cargo by customs authorities are not required.
  • SEZ Developers/Co-Developers and Units are entitled to direct and indirect tax benefits as stipulated in the SEZs Act of 2005.

33. Which one of the following is not the objective of SEZs (Special Economic Zones)? [U.P. Lower Sub. (Pre) 2009]

Correct Answer: (d) Discouraging foreign investment
Solution:The Special Economic Zone (SEZ) policy in India first came into inception on 1 April, 2000. Its prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports. The idea was to promote exports from the country and realizing the need that level playing field must be available to the domestic enterprises and manufacturers to be competitive globally.

Rules Pertaining to SEZs in India

  • A designated duty-free enclave is considered as a territory outside the customs jurisdiction of India for authorized operations within the Special Economic Zone (SEZ).
  • Duty free import and domestic procurement of goods for the development, operation, and maintenance of your company/SEZ unit.
  • No import license is necessary, and both manufacturing and service activities are permitted.
  • 100 percent income tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for the first five years, 50 percent for the next five years thereafter and 50 percent of the ploughed back export profit for the next five years.
  • Exemption from the Goods and Service Tax (GST) and levies imposed by the state government (supplies to SEZs are zero rated under the IGST Act, 2017, meaning they are not taxed).
  • Units within the SEZ must demonstrate Positive Net Foreign Exchange over a cumulative period of five years from the start of production.
  • Domestic sales are subject to full customs duty and adhere to the current import policy.
  • Minimum Alternate Tax (MAT) must be paid by SEZ units.
  • Single window clearances for all state and federal government approvals.
  • SEZ units have the liberty to engage in subcontracting.
  • Routine inspections of export/import cargo by customs authorities are not required.
  • SEZ Developers/Co-Developers and Units are entitled to direct and indirect tax benefits as stipulated in the SEZs Act of 2005.

34. Which one of the following cities does not have the Special Economic Zone: [U.P.P.C.S.(Pre) 2001]

Correct Answer: (e) None of the above
Solution:India was the first Asian country to introduce the Export Processing Zone (EPZ) model for promoting exports, with Asia's first EPZ set up in Kandla, Gujarat in 1965. The Exim Policy of 2000 set the ball rolling for setting up Special Economic Zones (SEZs) in the country with a view to provide an international competitive and hassle free environment for exports. The Special Economic Zone (SEZ) Act, 2005 further amended the country's SEZ policy. Many EPZs were converted to Special Economic Zones, with notable zones in Kandla and Surat (Gujarat), Santacruz (Mumbai), Cochin (Kerala), Chennai (Tamil Nadu), Falta (West Bengal), Visakhapatnam (Andhra Pradesh), Indore (Madhya Pradesh) and Noida (Uttar Pradesh). At present, there are 276 operational SEZ (Under the SEZ Act, 2005) as on 31 December, 2023 of which Tamil Nadu has largest number of operational SEZ.

35. The first Export Processing Zone of Asia was set up in 1965 in: [U.P.P.C.S. (Mains) 2011]

Correct Answer: (b) Kandla
Solution:India was the first Asian country to introduce the Export Processing Zone (EPZ) model for promoting exports, with Asia's first EPZ set up in Kandla, Gujarat in 1965. The Exim Policy of 2000 set the ball rolling for setting up Special Economic Zones (SEZs) in the country with a view to provide an international competitive and hassle free environment for exports. The Special Economic Zone (SEZ) Act, 2005 further amended the country's SEZ policy. Many EPZs were converted to Special Economic Zones, with notable zones in Kandla and Surat (Gujarat), Santacruz (Mumbai), Cochin (Kerala), Chennai (Tamil Nadu), Falta (West Bengal), Visakhapatnam (Andhra Pradesh), Indore (Madhya Pradesh) and Noida (Uttar Pradesh). At present, there are 276 operational SEZ (Under the SEZ Act, 2005) as on 31 December, 2023 of which Tamil Nadu has largest number of operational SEZ.

36. India's first Export Processing Zone (EPZ) was created in: [U.P.P.C.S. (Spl.) (Mains) 200]

Correct Answer: (a) Kandla
Solution:India was the first Asian country to introduce the Export Processing Zone (EPZ) model for promoting exports, with Asia's first EPZ set up in Kandla, Gujarat in 1965. The Exim Policy of 2000 set the ball rolling for setting up Special Economic Zones (SEZs) in the country with a view to provide an international competitive and hassle free environment for exports. The Special Economic Zone (SEZ) Act, 2005 further amended the country's SEZ policy. Many EPZs were converted to Special Economic Zones, with notable zones in Kandla and Surat (Gujarat), Santacruz (Mumbai), Cochin (Kerala), Chennai (Tamil Nadu), Falta (West Bengal), Visakhapatnam (Andhra Pradesh), Indore (Madhya Pradesh) and Noida (Uttar Pradesh). At present, there are 276 operational SEZ (Under the SEZ Act, 2005) as on 31 December, 2023 of which Tamil Nadu has largest number of operational SEZ.

37. Which among the following does not have a 'Free Trade Zone': [U.P.P.C.S. (Pre) 1999]

Correct Answer: (d) Thiruvananthapuram
Solution:As per the question period, among the given options, Thiruvananthapuram (Kerala) did not have a EPZ/SEZ. But at present, all of the given cities have operational SEZs. Two SEZs were notified in 2006 and became operational in Thiruvananthapuram.
  • Asia's first EPZ (export processing zones) set up in Kandla, Gujarat, in 1965, followed by seven more EPZs in the country.
  • The SEZ policy was introduced in April 2000, and it is envisioned to make SEZs a driver for economic growth supported by quality infrastructure and accompanied by an attractive incentives package, at the centre and state levels in the country.
  • The eight pre-existing EPZs located at Kandla and Surat (Gujarat), Mumbai (Maharashtra), Cochin (Kerala), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal), and Noida (Uttar Pradesh) were converted into SEZs under this scheme.
  • Later, the SEZ Act, 2005 was passed by the Indian Parliament in May 2005, and the act, supported by SEZ Rules, came into effect on February 10, 2006.
  • As of March 31, 2024, there are 280 operational SEZs in India.

38. Consider the following statements: [U.P.P.C.S. (Mains) 2009]

1. India's first EPZ was set up in 1965.

2. Special Economic Zone (SEZ) policy in India was formulated in 2000.

3. Vadodara is famous for Patola Silk.

4. Panna in Madhya Pradesh is famous for gold mines.

Of these statements:

Correct Answer: (a) Only 1, 2 and 3 are correct
Solution:Statements 1, 2 and 3 are correct, while Statement 4 is incorrect because Panna in Madhya Pradesh is famous for diamonds mining, not for gold mines.
  • Asia's first EPZ (export processing zones) set up in Kandla, Gujarat, in 1965, followed by seven more EPZs in the country.
  • The SEZ policy was introduced in April 2000, and it is envisioned to make SEZs a driver for economic growth supported by quality infrastructure and accompanied by an attractive incentives package, at the centre and state levels in the country.
  • The eight pre-existing EPZs located at Kandla and Surat (Gujarat), Mumbai (Maharashtra), Cochin (Kerala), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal), and Noida (Uttar Pradesh) were converted into SEZs under this scheme.
  • Later, the SEZ Act, 2005 was passed by the Indian Parliament in May 2005, and the act, supported by SEZ Rules, came into effect on February 10, 2006.
  • As of March 31, 2024, there are 280 operational SEZs in India.

39. The first Export Processing Zone of the Private Sector was established at: [U.P.P.C.S. (Mains) 2005]

Correct Answer: (a) Surat
Solution:Surat Special Economic Zone is the first operating EPZ/SEZ in the private sector in India. In 1997, Surat Export Processing Zone came into existence, which have been converted into Special Economic Zone w.e.f. 1 November, 2000. It is the main strategic business unit of Diamond and Gem Development Corporation Limited (DGDC).

Rules Pertaining to SEZs in India

  • A designated duty-free enclave is considered as a territory outside the customs jurisdiction of India for authorized operations within the Special Economic Zone (SEZ).
  • Duty free import and domestic procurement of goods for the development, operation, and maintenance of your company/SEZ unit.
  • No import license is necessary, and both manufacturing and service activities are permitted.
  • 100 percent income tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for the first five years, 50 percent for the next five years thereafter and 50 percent of the ploughed back export profit for the next five years.
  • Exemption from the Goods and Service Tax (GST) and levies imposed by the state government (supplies to SEZs are zero rated under the IGST Act, 2017, meaning they are not taxed).
  • Units within the SEZ must demonstrate Positive Net Foreign Exchange over a cumulative period of five years from the start of production.
  • Domestic sales are subject to full customs duty and adhere to the current import policy.
  • Minimum Alternate Tax (MAT) must be paid by SEZ units.
  • Single window clearances for all state and federal government approvals.
  • SEZ units have the liberty to engage in subcontracting.
  • Routine inspections of export/import cargo by customs authorities are not required.
  • SEZ Developers/Co-Developers and Units are entitled to direct and indirect tax benefits as stipulated in the SEZs Act of 2005.

40. Which group was permitted at Nandigram area under the SEZ policy: [B.P.S.C. (Pre) 2008]

Correct Answer: (c) Salim group
Solution:Nandigram is a rural area in Purba Medinipur district of West Bengal. In 2007 the West Bengal Government decided to allow Salim Group to set up a chemical hub at Nandigram under the SEZ policy, which was heavily protested by the villagers.

Rules Pertaining to SEZs in India

  • A designated duty-free enclave is considered as a territory outside the customs jurisdiction of India for authorized operations within the Special Economic Zone (SEZ).
  • Duty free import and domestic procurement of goods for the development, operation, and maintenance of your company/SEZ unit.
  • No import license is necessary, and both manufacturing and service activities are permitted.
  • 100 percent income tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for the first five years, 50 percent for the next five years thereafter and 50 percent of the ploughed back export profit for the next five years.
  • Exemption from the Goods and Service Tax (GST) and levies imposed by the state government (supplies to SEZs are zero rated under the IGST Act, 2017, meaning they are not taxed).
  • Units within the SEZ must demonstrate Positive Net Foreign Exchange over a cumulative period of five years from the start of production.
  • Domestic sales are subject to full customs duty and adhere to the current import policy.
  • Minimum Alternate Tax (MAT) must be paid by SEZ units.
  • Single window clearances for all state and federal government approvals.
  • SEZ units have the liberty to engage in subcontracting.
  • Routine inspections of export/import cargo by customs authorities are not required.
  • SEZ Developers/Co-Developers and Units are entitled to direct and indirect tax benefits as stipulated in the SEZs Act of 2005.
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