Special Economic Zones of India for Offshore Centers
SEZ gelp you maximize benefit for Offshore Centers
A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country’s domestic economic laws. India has specific laws for its SEZs.
SEZ in India are spread all over the country and available in almost all major tire1 and tire2 IT Industry clusters. Tire1 Cities being Bangalore, Delhi-Noida-Gurgaon (Delhi National Capital Region), Chennai, Pune, Mumbai, Hyderabad. Tire 2 Cities are Trivandrum, Kochi, Chandigarh, Jaipur, Gandhinagar, Coimbatore, Bhubeneshwar, Nagpur etc.
One can setup an Offshore center as a SEZ unit in one of the Special Economic Zone (SEZ) established and notified by Government of India. Government and private players have developed SEZs with world class infrastructure. A large number of Captive Offshore Centers of foreign companies as well as lot of Indian IT companies have SEZ units operating under these Special Economic Zones.
Also a private company can set-up a captive SEZ of its own or become a co-developer with an existing private SEZ.
Why setup in SEZ?
A business can set-up an offshore center to provide service to your global business from India, this service which may be a Software Development, Software/application maintenance, Software product development IT infrastructure or a BPO service (called in Indian legal parlance IT enabled service (ITeS)) or making and selling a product from Indian to rest of world. All these transactions are treated as exports from India.
SEZ is a 100% exported oriented scheme to promote exports from the country. As an SEZ unit the offshore center is entitled to various benefits.
One of the Prime benefit of operating under SEZ scheme is that you operate in a tax free zone and a Scheme of Government of India, thus enjoying a privileged treatment with respect to open market operations.
Tax Incentives and facilities offered to the SEZs
The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-
- 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years. (You pay 18.5% Minimum Alternate tax in place of Approx 33% corporate Income tax), there is 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.
- Duty free import of capital goods for development, operation and maintenance of SEZ units
- Duty free (Excise Duty) domestic procurement of goods for development, operation and maintenance of SEZ units
- External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels, allowing units to avail low interest rate borrowing at international market rate.
- Exemption from Service Tax.
- Exemption from Central Sales Tax.
- Single window clearance for Central and State level approvals.
- Exemption from State sales tax and other levies as extended by the respective State Governments.
How we help in setting up SEZ operations?
Our services include end-to-end consulting and project management support to set up the offshore center according to your requirements. When providing these services, we include the following:
We help you set-up either of two.
- Captive Offshore Center in Special Economic Zones. Or
- Managed Offshore Center in Special Economic Zones.
In Case of Captive Offshore Center we execute the end-to-end setup in an integrated framework where each of the below given module passes through the above four stages of Plan>Design>Establish>Manage.
- Regulatory and statutory compliance.
- Information and communication (ICT) infrastructures for global deliveries.
- Team formation and development – HR plan, recruit and induct.
- IT enabled facility – premises fit out & power.
- Hand-holding and project transitions.
- Operational plans, processes and stabilization (measured performance).
- Governance set-up.
[Project Management practice based on PMI model is the basis of execution. A PMO is setup for the entire project on site with a team that takes care of your entire set-up in above six modules.]
The result is >>a ready offshore center with the mitigation of Offshore risk along with the right scalabale solution.
The business entities allowed by Indian Law are:
- Private Limited company
- Public Limited Company
- Limited Liability Partnership
- Partnership firm
The # 2 and # 4 are best suited model for a Offshore center in India. The entity can be setup as a 100% subsidiary of parent company onshore. It is also possible to establish a joint venture and a project office based on needs.
The SEZ Captive Offshore center setup can be done in various models that may suit you.
SEZ units service is recommended for clients looking for long-term value with a team that has a minimum of 20+ people. Our recommendation is a 50+ person team. Those looking to set up a small team can utilize Managed Offshore Centers. Click here to read more.