What is SEZ?
SEZ or Special Economic Zone is an area in a country that is selected by the government for its development. This area has economical laws completely different from the laws of the country. These laws are made in such a manner so that they are business friendly to attract people to set up manufacturing, trading or service establishments. The establishments in SEZ can be established by foreign or native investments and the products can be sent exported or sold within the country.
What is EPZ
EPZ or Export Processing Zone is just like SEZ whose economic laws are different from the laws of country but they are designed to help the manufacturing companies that are exporting their entire production. EPZ has the sole aim to produce goods for export. The manufacturing units are given tax holiday for a fixed period of time so as to make the product competitive in the international market.
SEZ and EPZ were created by the governments of various countries with certain aims in mind like
• To attract the foreign investment
• Develop an area by raising infrastructure and providing jobs to the local population.
• Promote the technology and create skilled man power.
• To increase the economic growth of the country.
However the limited success or failure in some countries of EPZ gave rise to the concept of SEZ. The multinational companies used EPZ to their great advantage by moving their establishments from country to country after the tax holiday ended. SEZ has much more flexibility and is much larger in size than EPZ and has proved successful in almost all countries.
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Differences between SEZ and EPZ • SEZ are much larger in geographical size than EPZ. • SEZ has much larger scope of business than EPZ. • SEZ is found all the countries but EPZ are generally located in under developed or developing countries. • Infrastructure of SEZ consist of manufacturing units, townships, roads, hospitals, schools and other services but EPZ are confined to manufacturing establishments. • The benefits of SEZ are more towards the growth of domestic business where as EPZ has the main objective of developing exports business. • SEZ is open to all fields of business like manufacturing, trading and services but EPZ has more focus on manufacturing. • Tax benefits in SEZ are much more than in EPZ. • There is very limited accountability of export performance in SEZ but it has great influence over the business carried out in EPZ as the penalties and duty recovery is imposed in case of shortfall. • The consumption of raw material that is imported duty free has to be consumed over a period of 5 years in SEZ but the time period in EPZ is only 1 year. • Laws concerning the certification of the import goods are much more relaxed in SEZ than in EPZ. • Custom department has less interference in the inspection of the premises in SEZ but EPZ requires routine customs inspection of cargo. • FDI investment in manufacturing unite does not require sanctions from the board as it is in EPZ.
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