Drawbacks of SEZs

The SEZ offers various incentives to developers as well as entrepreneurs. A
significant feature of SEZs is the fact that they are usually located on the outskirts of the
cities. In order to avail exemptions, companies, both SME or larger ones, will have to move
from the DTA to the SEZ. This move is likely to affect the SMEs more than the larger
companies. For instance, the area required to build a SEZ ranges from 10 hectares to 1,000
SMEs will, in all probability, lack the fiscal strength to establish an entire SEZ, and
will, potentially, look to form a unit within the SEZ. This too may act as a hurdle because
the influx of companies within SEZs has created a high demand, low supply condition
leading to escalated land prices. As a consequence, competition to establish units is
exceedingly high. Companies with strong balance sheets and financial capabilities find it
easier to generate the funds, either through equity or debt, for capital expenditure involved
in a new investment that will, ultimately, prove to be beneficial. SMEs may not have such
easy access to funds to establish units within a SEZ, and may not want to incur the
significantly higher costs involved in establishing and relocation to a unit within a SEZ. The
government needs to consider the possibility of demarcating land catering only for the SMEs
so that they too can avail of the benefits the scheme has to offer.

Drawbacks of STPs

Comparing the incentives granted to SEZ with those to STP, it is quite evident that
the exemptions provided to the STP are not at par with those provided to SEZ. The tax
concessions including the exemption of MAT, DDT and capital gains tax are available only
in a SEZ. A STP unit also has certain minimum export obligation to fulfill for 5 years viz.,
US $ 0.25 Million or 3 times the Cost in Freight value of imported goods, whichever is
As far as sales in the DTA i.e., the area within India but outside the SEZ or STP is
concerned, it appears that although both SEZ and STP units may sell goods or services to
the DTA, a STP unit is permitted to sell only up to 50% of the FOB value of its exports into
the DTA on fulfillment of specified conditions.

Important aspects of the application form are :
1. Company profile
2. Capital structure
3. Pattern of Shareholding in the paid up capital
4. Projection for capital goods requirement
5. Manpower Projections
6. Export earnings
7. Foreign collaborations.
8. Area of expertise.
9. Estimated time frame for commencement of operation and exports
10. Communication requirement
11. Space requirement / Built –up land.

Following copies of documents shall be the enclosures:
1. Memorandum & Articles of Association for registered firms (public and private limited)
2. Partnership Deed for partnership firms
3. Board Resolution:
i. Board resolution copy mentioning the willingness to get registered with STPI as an 100% exporting unit.
Also, mention the name of the authorized signatory to sign all the relevant documents.
ii. For maintaining separate books of accounts for the unit under STP Scheme as per Para 6.11.1 of Foreign
Trade Policy-chapter 6.
iii. For maintaining distinct identity as per Para 6.11.1 of Foreign Trade Policy-chapter 6.
4. Permanent Account Number – (Enclose copy)
If it is not available, kindly apply to Income Tax office of the respective area. The application form for PAN No. is
available in the offices of Income Tax.The acknowledged copy of application should be enclosed.
5. Importer-Exporter Code (IEC) – Enclose copy.

Extra Help

Before anything else, you need to think through your business idea and develop a business plan that shows exactly what you want to do and how you want to do it. If you need extra help, simply contact us -02024570055 or Email@

When you have considered all the options and made your choices, you are ready to apply for a business license.

If any query, please feel free to contact.

Thanking you and assuring best professional services.

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