Free Trade Zones In India - How It Functions?
We live in a world economy that is sustained by interconnected markets. While many countries
find innovative winning strategies to augment their economic growth and bring in foreign
investment, some are taking concrete steps to make them true by introducing FTZs or foreign
trade zones. Likewise, FTZ in India are one of the most prominent tools for the nation to attract
foreign trade and commerce within India.
With lenient regulatory processes and streamlined operations, free trade zones promote
massive economic growth and development in the country, creating a favorable environment for
trade.
A Free Trade Zone
What is meant by the term - free or foreign trade zone? Well, it is a special and designated
region within a specific location in a country wherein the products or goods are imported, kept in
storage, processed, manufactured, modified, and sometimes even re-exported without paying
tariffs or customs regulations. FTZs in India are mostly placed in prime areas such as near the
seaports, airports, country borders, or other primary areas that have a geographical edge in
terms of trade.
With sufficient tax breaks and uncomplicated customs regulations, the companies working or
operating within a specific free trade zone do enjoy various incentives such as the power to
import goods or parts duty-free, retain all the foreign currency profits, and get tax exemptions.
Such inducements are aimed at appealing to foreign investors and also open pathways for local
employment within the region. All these measures can contribute to the overall economy of a
country. Mega multinational corporations continuously use the free trade zones to start factories
for numerous purposes like manufacturing shoes, clothing, parts, electronics, etc. FTZs in India
are known as SEZs or special economic zones. In the year 2023, the country had around 270
plus SEZs that were said to be operational.
How do free or foreign trade zones work?
Foreign or free trade zones (FTZs) give a unique trading opportunity to defer, reduce, or do
away with complex customs duties on import goods. Once such goods enter a free trade zone,
they are duly stored, changed (if needed), repaired (if required), or manufactured for trade,
trans-shipment, and re-export projects. Goods or products within an FTZ warehouse facility are
not subject to that country’s customs and jurisdiction.
Goods inside an FTZ warehouse can either be sent for re-export or transferred to the local
market for timely consumption. All pending duties and taxes become payable once the placed
goods are moved from the free zone facility and transferred to a domestic location for
consumption.
To explain in plain terms, a foreign trade zone is deemed a special place or area that is near a
port of entry from where incoming goods are carefully handled, stored, manufactured, and
re-exported without customs regulations and government intervention.
In an FTZ in India such as OSV FTWZ, both international and domestic goods or merchandise
are treated as foreign commerce, which falls outside the jurisdiction of the Indian customs
department, allowing for more freedom of movement for the merchandise and related
businessmen. You can witness smooth and streamlined administrative processes and effective
free trade.
Advantages of free trade zones in India
The key benefits of FTZs in India are as follows:
●
Temporary elimination of customs duty - Free trade warehousing zones are freed
from customs regulations. Goods that enter these zones are not subject to any customs
duties until they leave the facility. This interval can last for 5 years and is between the
import and export operations, it allows companies to defer duty expenses and go ahead
with assembling or manufacturing the goods for foray into the Indian market or for
re-exportation.
●
No duties for re-exports - Re-exported products are not levied customs duties when
they leave an FTZ. By utilizing free trade zones, businesses can fully bypass complex
customs fees or duties procedures. Moreover, no taxes are put on products that have
been destroyed within the free zone. This can benefit enterprises or companies dealing
with delicate and fragile imported goods or industrial parts that may generate substantial
waste.
●
Export distribution - A free trade warehousing zone manages to eliminate certain
import duties if any finished goods enter the Indian shores for potential export.
Therefore, using FTZs in India as a great export distribution hub can present with several
advantages when selling those products in foreign markets.
●
Streamlined logistics - The relaxed nature of customs procedures within a free trade
warehousing zone facility can offer quicker turnarounds for ships and planes, leading to
swift processing time. In some facilities, imports can be delivered straight to the zone
upon customs permission or approval, and permission to open a sealed product
package or attach customs seals on packages can be requested. A single entry can be
used to file multiple exports, thus untangling lengthy logistics processes.
Where are free trade zones located in our country?
India boasts of many special economic zones. Currently, there are around 270 fully operational
special economic zones spread all over India, in different states and Union Territories.
Onnsynex Ventures Pvt. Ltd. is a leading and trusted company that provides free trade
warehousing zones in Chennai, Delhi NCR, Mumbai, Bangalore, and other states. Other FTZs
are located in Reliance Jamnagar SEZ, the Kandla SEZ in Gujarat, and the Cochin SEZ in
Kerala, States like Tamil Nadu, Telangana, Maharashtra, Gujarat, Karnataka, and Andhra
Pradesh have the highest concentration of FTZs in India.
Conclusion
Foreign or free trade zones (FTZs) are critical instruments instigating economic growth via
international trade, offering foreign businesses a chance to do business in India through
streamlined and controlled customs procedures including the presentation of tax incentives. By
attracting sizable foreign investment, and promoting job opportunities and technological
innovation, logistics partners like Onnsynex have a major hand in India’s economic
development.
You can contact team OSV for inquiries and logistical support related to foreign and domestic
goods storage, renting out warehousing units, customs compliance, tax reduction, shipping
costs, and all sundry aspects of export/import trade and commerce.