by Free Trade Zones (FTZs) refer to specific geographic areas where goods can be imported, processed, and re-exported without being subject to the usual customs procedures and regulations. The primary objective of FTZs is to promote international trade and investment by creating a favorable environment for businesses to operate in.
The policy framework for FTZs in India was first established in 1965, and the first FTZ was set up in Kandla, Gujarat. Since then, the policy has been revised several times, and today, there are over 200 FTZs operating in the country.
The main objectives of FTZs in India are as follows:
- To encourage foreign investment: FTZs create an attractive investment climate by offering a range of incentives such as tax holidays, duty exemptions, and simplified procedures for setting up businesses.
- To promote exports: FTZs provide a conducive environment for export-oriented industries by providing access to world-class infrastructure, logistics, and transportation facilities.
- To generate employment: FTZs create employment opportunities by attracting businesses and industries that require a large workforce.
- To promote technology transfer: FTZs facilitate the transfer of technology by providing a platform for collaboration between foreign and domestic businesses.
The criteria for setting up an FTZ in India include the following:
- The proposed location must be easily accessible by air, sea, or land transportation.
- The area must have adequate infrastructure, including roads, water supply, electricity, and communication facilities.
- The proposed project must have a minimum investment of Rs. 100 crore.
- The project must have an export-oriented focus and must generate a minimum of 50% of its revenue from exports.
Benefits of operating in an FTZ in India include the following:
- Tax benefits: FTZs offer tax benefits such as duty exemptions on raw materials, capital goods, and finished goods. Companies operating in FTZs are also eligible for income tax exemptions.
- Regulatory benefits: Companies operating in FTZs are exempt from many of the usual regulatory procedures and requirements, such as obtaining import licenses and complying with labor laws.
- Infrastructure benefits: FTZs provide world-class infrastructure facilities, including modern warehouses, transportation facilities, and IT infrastructure.
- Flexibility: Companies operating in FTZs have the flexibility to import raw materials, process them, and re-export finished goods without being subject to customs regulations.
The procedures and documentation required for setting up and operating in an FTZ in India include obtaining necessary licenses and permits, complying with environmental and labor laws, and meeting the export-oriented requirements of the project. Companies must also maintain accurate records of all transactions and submit regular reports to the relevant authorities.
