To understand what India means by SEZs, we need to appreciate that they are internationally defined as being "Specified, delineated and duty free geographical region that has different economic laws from those of the country in which it is situated."

In essence this means all zones in India are designated as "Special Economic Zones," whereas in other countries (China for example) other more specific terms apply to designate the type of industry focus each zone has. The Indian terminology combines all of these into one term – Special Economic Zones.

PERMITTED ACTIVITIES IN INDIA SPECIAL ECONOMIC ZONES

Manufacturing

Indian SEZs have a fairly loose definition of permitted activities, and they allow activities, such as services, that other Asian countries – China and Vietnam – place restrictions on. India also does not discriminate between manufacturing entities and services entities when it comes to tax breaks and investment incentives, something that China does as service companies do not qualify for the two plus three year tax holiday in the PRC. This makes India an interesting potential destination for foreign investors in the services industry.

Legal definition – Manufacturing: “Make, produce, fabricate, assemble, process or bring into existence a new product having a distinctive name, character or use; including processes such as refrigeration, cutting, polishing, blending, repair, remaking, and re-engineering”

Permitted activities – Services: Trading, warehousing, research & development services Computer software services, call centers, data processing, database management Insurance claim processing, medical transcription, support centers Offshore banking, professional services (excluding law / tax) rental / leasing services Other business services, courier, audio-visual, construction, distribution, educational, financial, hospital, travel & tourism, cultural, transportation, entertainment, recreational, and auxiliary services