What is the primary benefit offered to businesses in Special Economic Zones (SEZs)?

Correct — A. A Special Economic Zone is a duty-free enclave, treated as foreign territory for the purposes of trade operations, duties and tariffs. What a unit inside it actually receives is tax and duty concession.

In practice that means duty-free import and domestic procurement of goods for developing, operating and maintaining the unit, plus income-tax relief on export profits under the SEZ Act.

Nothing else offered is a benefit a government can hand over by notification. The concessions are fiscal, and they are the point of the zone. Option (a).

Why the others are wrong

• (b)
  Mandatory government contracts — The SEZ framework carries no procurement guarantee. Units are set up to export, and the government does not undertake to buy from them.
• (c)
  Guaranteed market share — Market share is not in any government's gift. SEZ policy lowers a unit's costs and clearance burden, which is an input advantage, not a promise of demand.
• (d)
  Unlimited foreign investment — Foreign investment in an SEZ still follows India's FDI policy and its sectoral caps. Liberal, single-window, largely automatic-route treatment is not the same as unlimited.

An SEZ is a demarcated area that a country's customs law treats as lying outside its own territory. Goods entering it are not imports consumed at home, so they escape customs duty; goods sold from it into the domestic market are treated as imports.

India's version runs under the SEZ Act, 2005, with rules notified the following year. It replaced the older export processing zone model that began with Kandla in 1965, Asia's first such zone.

The incentives come in two kinds: fiscal, meaning duty and tax relief, and administrative, meaning single-window clearance through a Board of Approval and a Development Commissioner.

Key facts

• SEZs in India operate under the Special Economic Zones Act, 2005.
• An SEZ is treated as foreign territory for the purposes of trade operations, duties and tariffs.
• Units get duty-free import and domestic procurement of goods for development, operation and maintenance.
• Kandla, set up in 1965, was Asia's first export processing zone and the forerunner of India's SEZs.

Common traps

• Deemed foreign territory applies to duties and trade operations, not to sovereignty or labour law.
• Sales from an SEZ into the domestic market are treated as imports and attract duty.
• FDI liberalisation and SEZ benefits are separate policies that blur together in memory.

No directly related past PYQ was found.