Type Shipping Bill

1. Duty Entitlement Pass Book

DEPB (Duty Entitlement Pass Book ) is an export incentive scheme of Indian Government
provided to Exporters in India.[1]

Duty Entitlement Pass Book Scheme in short DEPB is an export incentive scheme. Notified
on 1/4/1997, the DEPB Scheme consisted of (a) Post-export DEPB and (b) Pre-export DEPB.
The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB,
which is issued after exports, the exporter is given a duty entitlement Pass Book Scheme at a
pre-determined credit on the FOB value. The DEPB rates allows import of any items except
the items which are otherwise restricted for imports. Items such as Gold Nibs, Gold Pen,
Gold watches etc. though covered under the generic description of writing instruments,
components of writing instruments and watches are thus not eligible for benefit under the
DEPB scheme.

The DEPB Rates are applied on the basis of FOB value or value cap whichever is lower. For
example, if the FOB value is Rs.700/- per piece, and the value cap is Rs.500/- per piece, the
DEPB rate shall be applied on Rs.500/-. The DEPB rate and the value cap shall be applicable
as existing on the date of exports as defined in paragraph 15.15 of Handbook (Vol.1).

DEPB Scheme is issued only on post-export basis and pre/export DEPB Scheme has been
discontinued. The provisions of DEPB Scheme are mentioned in Para 4.3 and 4.3.1 to 4.3.5
of the Foreign Trade Policy or Exim Policy. One significant change in the new DEPB
Scheme is that in terms of Para 4.3.5 of the Exim Policy even excise duty paid in cash on
inputs used in the manufacture of export product shall be eligible for brand rate of duty
drawback as per rules framed by Department of Revenue which was not mentioned in the
earlier DEPB Scheme.

Benefits of DEPB Rates

The benefit of DEPB schemes is available on the export products having extraneous material
up to 8% by material up to 5% shall be ignored and the DEPB rate as notified for that export
product is be allowed.

Review of DEPB Rates

The Government of India review[2] the DEPB rates after getting the appropriate an export
import data on FOB (shipping) value of exports and Cost, Insurance and Freight (CIF) value
of inputs used in the export product, as per SION. Such data and information is usually
obtained from the concerned Export Promotion Councils.

Implementation of the DEPB Rates

Some additional facilities as listed below have been provided for better implementation of the
DEPB Rates
  DEPB rates rationalized to account for the changes in Customs duties.
 Caps fixed on certain items but there would be no verification of Present Market Value
(PMV) on such items.
 A number of ports have been added for availing facilities under the Duty Exemption Scheme,
including DEPB.
 The threshold limit of Rs. 200 million for fixing new DEPB rates removed.

Provisional DEPB Rate

The main objective behind the provisional DEPB rates is to encourage diversification and to
promote export of new products. However, provisional DEPB rates would be valid for a
limited period of time during which exporter would furnish data on export and import for
regular fixation of rates.

Maintenance of Record

It is necessary for Custom House at ports to maintain a separate record of details of exports
made under DEPB Schemes.

Port of Registration

The exports/imports made from the specified ports given shall be entitled for DEPB.

 Sea Ports: Mumbai, Kolkata, Cochin, Dahej, Kakinada, Kandla, Mangalore, Mormugao,
Mundra, Chennai, Nhava Sheva, Paradeep, Pipavav, Sikka, Tuticorin Vishakhapatnam, Surat
(Magdalla), Nagapattinam, Okha, Dharamtar and Jamnagar.

 Airports: Ahmedabad, Bangalore, Bhubaneshwar Mumbai, Kolkata Coimbatore Air Cargo

Complex, Cochin, Delhi, Hyderabad, Jaipur, Srinagar, Trivandrum, Varanasi, Nagpur and
Chennai.

 ICDs : Agra, Ahmedabad, Bangalore, Bhiwadi, Coimbatore, Daulatabad, (Wanjarwadi and

Maliwada), Delhi, Dighi (Pune), Faridabad, Guntur, Hyderabad, Jaipur, Jallandhar, Jodhpur,
Kanpur, Kota, Ludhiana, Madurai and the land Customs station at Ranaghat Mallanpur,
Moradabad, Meerut Nagpur, Nasik, Gauhati (Amingaon), Pimpri (Pune), Pitampur (Indore),
Rudrapur (Nainital), Salem Singanalur, Surat, Tirupur, Udaipur, Vadodara, Varanasi, Waluj,
Bhilwara, Pondicherry, Garhi-Harsaru, Bhatinda, Dappar, Chheharata (Amritsar), Karur, Miraj
and Rewari.

 LCS: Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva ( Sonauli), Petrapole and Mahadipur.

The exports made to the following Special Economic Zones (SEZ) are also entitled to DEPB.

 SEZ : Santacruz, Kandla, Kochi, Vishakhapatnam, Chennai, FALTA, Surat, NOIDA

Credit under DEPB and Present Market Value

In respect of products where rate of credit entitlement under DEPB Scheme comes to 10% or
more, amount of credit against each such export product shall not exceed 50% of Present
Market Value (PMV) of export product. During export, exporter shall declare on shipping bill
that benefit under DEPB Scheme would not exceed 50% of PMV of export product.

However PMV declaration shall not be applicable for products for which value cap exists
irrespective of DEPB rate of product.

Utilization of DEPB credit

Credit given under DEPB Schemes is utilized for payment of Indian customs duty

Re-export of goods imported under DEPB Scheme

In case of return of any exported goods, which has been found defective or unfit for use may
be again exported according to the exim guidelines as mentioned by the Department of
Revenue.

In such cases 98% of the credit amount debited against DEPB for the export of such goods is
generated by the concerned Commissioner of Customs in the form of a Certificate, containing
the amount generated and the details of the original DEPB. On the basis of certificate, a fresh
DEPB is issued by the concerned DGFT Regional Authority. It is important to note that the
issued DEPB have the same port of registration and shall be valid for a period equivalent to
the balance period available on the date of import of such defective/unfit goods.[3]

2. Export Promotion Capital Goods

Traders are eagerly awaiting to know new amendments and modification on export
promotion scheme, Export Promotion Capital Goods EPCG in new Foreign Trade Policy
2015-20 , is being operationalized on 1st April, 2015.

Under EPCG scheme of Foreign Trade Policy, import of capital goods which are required for
the manufacture of resultant export product specified in the EPCG Authorization is permitted
at nil/concessional rate of Customs duty. The Export Promotion Capital Goods scheme under
FTP enables up gradation of technology of the indigenous industry. EPCG Authorizations are
issued by Regional Licensing Authority of Director General of Foreign Trade on the basis of
nexus certificate issued by an independent chartered engineer.

As per the Foreign Trade Policy 2009-14 amended later time to time in annual supplements,
the EPCG Authorization holder is permitted to import capital goods at 0% or 3% Customs
duty. Under the 0% duty EPCG Authorization holder is required to undertake export
obligation equivalent to 6 times of the duty saved amount on the capital goods imported
within a period of 6 years reckoned from the date of issue of Authorization. Under the 3%
duty EPCG scheme, the Authorization holder has to fulfill EO equivalent to 8 times of the
duty saved amount on the capital goods imported in 8 years.
Under EPCG scheme, the capital goods imported are subject to actual user condition and the
goods imported cannot be transferred or sold till the fulfillment of export obligation. In order
to ensure that the capital goods imported under EPCG scheme are utilized in the manufacture
of resultant export product, after importation and clearance of capital goods from Customs
area at importing location, the Authorization holder is required to produce certificate from the
jurisdictional Central Excise Authority or Chartered Engineer confirming installation of such
capital goods in the declared premises. At present, a period of 6 months is allowed for the
purpose of installation of capital goods and commencement of production. This period may
be extended by the Assistant/Deputy Commissioner of Customs.

At present, before operationalization of new Foreign Trade Policy 2014-19, the EPCG
Authorizations are issued to manufacturer exporters and merchant exporter with or without
supporting manufacturer, and service providers. EPCG scheme is also available to a service
provider who is designated or certified as a Common Service Provider by the DGFT or State
Industrial Infrastructural Corporation in a Town of Export Excellence. EPCG authorization
issued to a Common Service Provider gives details of the users and the quantum of export
obligation which each user has to fulfill. The CSP as well as the specific users are under an
obligation to fulfill the export obligation under EPCG scheme.

At present, up to 50% of the EO may also be fulfilled by export of other goods manufactured
or service provided by the importer or his group company or managed hotel, which has the
EPCG Authorization, subject to the condition that in such cases, additional EO imposed shall
be over and above the average exports achieved by the importer or his group company or
managed hotel in preceding three years for both the original and the substitute products or
services .

The EPCG Authorization specifies the value,quantity or both of resultant export product to be
exported against it. In the case of manufacturer,merchant or service exporters, such export
obligation is required to be fulfilled by exporting goods manufactured or capable of being
manufactured or services rendered by the use of capital goods imported under the scheme.

After the introduction of Export Promotion Capital Goods scheme by Foreign Trade Policy
and subsequent amendments and supplements ordered in different circulars till 18th January,
2011, the EPCG Authorization holder is required to file a bond with or without bank
guarantee with the Customs prior to commencement of import of capital goods. Bank
guarantee equal to 100% of the differential duty in case of merchant exporters and 25% in
case of manufacturer exporters is required to be submitted except in case of a few exempted
categories to ensure fulfillment of specified export obligation as well as to secure interest of
revenue.
Now, EPCG Authorization can also be obtained for annual requirement with a specific duty
saved amount and corresponding export obligation. It indicates the export products through
which export obligation shall be fulfilled.

As per present Foreign Trade Policy 2009-14 supplemented by different notifications time to
time, the normal validity period of zero duty EPCG Authorization is 9 months and that of 3%
EPCG Authorization is 24 months. The licensing Authority may revalidate authorization for
six months at a time and maximum up to 12 months from the date of expiry of validity. For
the purpose of monitoring export obligation, the EPCG Authorization holder is required to
indicate the details of EPCG Authorization on the Shipping Bill and Commercial invoice,in
case of deemed exports. After fulfillment of specified export obligation, the Authorization
holder submits relevant export documents along with EPCG Authorization to the DGFT
authorities for the purpose of obtaining EO discharge certificate. After obtaining export
obligation discharge certificate from DGFT, the Authorization holder produces the same
before Customs for the purpose of obtaining redemption of bond and Bank Guarantee filed by
EPCG Authorization holder.

For the purpose of monitoring and ensuring on export obligation fulfillment by EPCG
Authorization holder, block wise export obligation is also specified by licensing authority
based on the guidelines of Foreign Trade Policy amended time to time.

Present Foreign Trade Policy allows EPCG authorization holder to extend block-wise period
for any block or overall period of fulfillment of export obligation up to a period of two years
on payment of composition fee equal to 2% of proportionate duty saved amount on
unfulfilled export obligation for each year of extension. The Licensing authority grant further
extension in the overall period of EO up to a period of further two years if the authorization
holder pays 50% of differential duty on the unfulfilled portion of export obligation and agrees
to fulfill other conditions as may be specified by the Regional Authority (Licensing
Authority) for this purpose.

At present, the EPCG holder under zero duty scheme can avail only one extension of two
years in export obligation period shall be available subject to conditions mentioned.

As per the present Foreign Trade Policy, under an EPCG scheme, exports in discharge of
export obligation are entitled to duty neutralization schemes like Drawback, Advance
Authorization, DFIA etc. as well as benefits of reward schemes such as FPS, FMS, VKGUY
etc. in accordance with the terms and conditions of those schemes. But as per Foreign Trade
Policy amended time to time with annual supplements, benefits under reward schemes like
TUFS and SHIS can not be in the year in which the zero duty authorization has been issued.
EPCG scheme is one of the best export promotion schemes introduced by government under
Foreign Trade Policy where in import of capital goods can be effected at nil or concessional
import customs duties based on the conditions specified in the customs notifications and
export obligations. However, EPCG authorization holder has to fulfill export obligation
against the scheme specified, action is taken by the authorities to recover the import customs
duty on defaulters through an institutional mechanism.

3. Concept of 100% Export Oriented Unit (EOU) Scheme

Under the EOU scheme, the units are allowed to import or procure locally without payment
of duty all types of goods including capital goods, raw materials, components, packing
materials, consumables, spares and various other specified categories of equipments
including material handling equipments, required for export production or in connection
therewith. These units may be engaged in the manufacture, services, development of
software, trading, repair, remaking, reconditioning, re-engineering including making of
gold/silver/platinum jewellery and articles thereof, agriculture including agro-processing,
aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisiculture,
viticulture, poultry, sericulture and granites. Even the goods appearing in the restricted list of
the EXIM Policy are permitted to be imported. However, the goods prohibited for import are
not permitted. In the case of EOUs engaged in agriculture, animal husbandry, floriculture,
horticulture, pisciculture, viticulture, poultry, sericulture and granite quarrying, only specified
categories of goods mentioned in the relevant notification have been permitted to be imported
duty-free.
The exporters are treated as a special class. Exporter are given a specific premises to operate
the Trade activites and given the required tariff, non-tariff and policy support to facilitate
their export efforts. Export Oriented Unit (EOU) Scheme, which had been introduced in the
early 1980s remains in the forefront of country’s export production schemes. The scheme has
witnessed many changes over the last twenty-four years in the context of ever changing
economic realities. However, the basic premise remains the same. Thus, today the EOU
Scheme has emerged as a dynamic policy initiative facilitating the exporting community in
the task of increased exports. The EXIM Policy, 2002-07 reinforces the importance of
Scheme in chapter 6 of the policy. Appendix 14 I of the Handbook of procedures (Vol.1) as
amended upto 28- 1-2004 sets out the procedures and benefits of this scheme.

100% EOUs fall into 3 categories

1. EOUs established anywhere in India and exporting 100% products except certain
fixed percentage of sales in the Domestic Tariff Area (DTA) as may be permissible
under the Policy.
2. Units in Free Trade Zones in Special Economic Zones (SEZs) and exporting 100% of
their products.
3. EOUs set up in Software Technology Parks (STPs) and Electronic Hardware
Technology Parks (EHTPs) of India for development of Software & Electronic
Hardware.
POLICY / PROCEDURE

The letter of permission for establishment of such EOUs under categories (a) to (b) is given
by Development Commissioner Seepz SEZ at Andheri (E) in Mumbai for the units
established in western zones, while for the units under category (c), the LOP is granted by
Director, Software Technology Park of India, Vashi, Navi Mumbai after careful study of the
feasibility of unit. The details of the policy may be obtained by visiting the STPI website at
www.stpimumbai.net. After obtaining LOP, the unit has to approach Customs for obtaining
the facilities of duty free import and excise - duty free procurement of indigenous goods of
the raw material and capital goods required for the manufacture of finished products in
Bonded warehouse u/s 58 & 65 of Customs Act, 1962 for the purpose of 100% export out of
India.
The letter of permission for establishment of such EOUs under categories (a) to (b) is given
by Development Commissioner Seepz SEZ at Andheri (E) in Mumbai for the units
established in western zones, while for the units under category (c), the LOP is granted by
Director, Software Technology Park of India, Vashi, Navi Mumbai after careful study of the
feasibility of unit. The details of the policy may be obtained by visiting the STPI website at
www.stpimumbai.net. After obtaining LOP, the unit has to approach Customs for obtaining
the facilities of duty free import and excise - duty free procurement of indigenous goods of
the raw material and capital goods required for the manufacture of finished products in
Bonded warehouse u/s 58 & 65 of Customs Act, 1962 for the purpose of 100% export out of
India.
For this purpose, the unit has to execute a Bond known as B-17 Bond which, inter adia,
covers an undertaking by the unit to pay on demand an amount equal to the duty leviable on
the goods imported duty free that are not proved to the satisfaction of the Asstt.
Commissioner of Custom to have been used in the manufacture of articles for export. The
value of Bond should be 25% of the amount of duty leviable on capital goods intended to be
procured and on raw material to the held in stores for 6 months. The Bond is to the supported
either by a surety for 100% of the value of Bond or by a Bank Guarantee for 5% of the value
of Bond. The Bank Guarantee should be a continuing one.
The unit has to furnish following documents for applying to Deputy / Assistant
Commissioner to grant a license of Customs Bonded warehouse and permission for
manufacturing in Bonded warehouse u/s 58 & 65 of Customs Act, 1962.

List of documents required to be furnished are as follows:

1. Application for grant of licence u/s 58 & 65 of Customs Act, 1962 (Refer to format)
2. FORM B-17 Bond …….. (Refer to B - 17 bond format)
3. Bank Guarantee …… (Refer to B.G. format)
4. Insurance Policy for Fire & Burglary …… (For capital goods)
5. Supplementary Terms and Conditions
6. Affidavit with respect to non envolvement in Customs & Central Excise Cases (Refer
to format given)
7. DoE/STPI letter of approval vide ref. no. ………………………..
8. List of proposed plant, machinery & capital goods
9. Agreement with STPI / SEEPZ for Export Commitment
10. Process of Manufacture
11. Green Card No……………………………………………………
12. Self Removal Procedure approval request letter
13. Solvency Certificate
 14. List of Board of Directors
15. Lease Agreement of premises
16. Ground Plan of premises
17. IEC Certificate
18. PAN
19. Memorandum & Articles of Association

The specimen form for B-17 Bond and Bank Guarantee to be submitted by unit & its Banker
are given as annexures ‘A’ & ‘B’.

For the purpose of renewal of licence, only following documents are required to be furnished
-

1. Application for renewal in the prescribed Performa.

2. Solvency Certificate.
3. Export Statement.
4. B-17 Bond on Rs. 100/- Stamp Paper duly notarized irrespective of the fact whether
the unit intended to make any import or not (if any enhancement of capital /
indigenous goods limit or change of address)
5. Bank Guarantee (if earlier expired)
6. Supplementary terms and conditions duly accepted on Rs.100/- stamp paper duly
notarized.
7. Lease Agreement duly registered with the area sub - register. (Stamps)
8. Declaration for customs.
9. Insurance Policy (for Fire / Burglary)

For the import of duty free capital goods or raw materials, unit has to make an application to
Customs alongwith copy of invoice duly attested, packing list, Import certificate from STPI
in case of STP, HTPI units, IGMS & Airway Bill or Bill of lading. The department will issue
a serial numbered Procurement Certificate for duty free imported goods.
For procurement of duty free indigenous goods, purchase order & import certificate from
STPI (in case of STP, HTPL units) is to be produced. The department will issue a CT-3 form
to enable duty free procurement of indigenous goods.
THE UNITS ARE ELIGIBLE FOR THE FOLLOWING FACILITIES UNDER VARIOUS
LAWS AND GOVT.AUTHORITIES

Customs and Excise

 SEZ Units are free to import from the domestic sources without paying any duty on
capital goods, raw materials, consumables, spare, packing materials, office
equipment, DG sets, etc. for implementation of their project in the zone without any
license or specific approval. Good which are imported duty free could be utilized over
the approval period of 5 years.
 Sales to DTA (Domestic Tariff Area) by SEZ units is always regarded as import and
is subject to all normal import duties, including Countervailing Duty, SAD, etc.
 SEZ Units are free from the periodic examination by Customs of export and import
cargo.
 SEZ units may sub-contract a part of their production through units in
DTA/SEZ/EOU/EPZ with the permission of the customs authorities. Sub-contracting
 may also be permitted for processing abroad with the permission of the board of
approval.

Income Tax

Part-1 Income Tax incentives for SEZ units

 Tax exemption for SEZ units engaged in manufacture or providing services- A new
section 10AA has been introduced in the IT Act by SEZ Act, 2005 which provides
that the units in SEZ which start manufacturing or producing articles/ things or which
start providing services on or after April 1, 2005 will be eligible for a deduction of
100 percent of export profits for the first five years from the year in which such
manufacture/ provision of services commences and 50 percent of the export profits for
the next five years. Further, for the next five years a deduction shall be allowed of up
to 50 percent of the profit as is debited to the profit and loss account and credited to
the Special Economic Zone Reinvestment Reserve Account (subject to conditions).
 Tax exemption for Offshore Banking units in SEZ- A deduction in respect of certain
incomes would be allowed under the new section 80LA, to scheduled banks or foreign
banks having an Offshore Banking unit in SEZ or to a unit of IFSC. The deduction
shall be for 100 percent of income for five consecutive years beginning from the year
in which permission/ registration has been obtained under the Banking Regulation Act
or the SEBI Act or any other relevant law and 50 percent of income for next five
years.
 Interest received by non-residents and not ordinary residents on deposits made with an
Offshore Banking Unit on or after April 1, 2005 shall be exempt from tax.
 Exemption from Minimum Alternate Tax ("MAT")- Income arising or accruing on or
after April 1, 2005 from any business carried on, or services rendered by SEZ unit
would be exempt from MAT under section 115JB.
 Exemption from Capital Gains- Capital gains arising on transfer of assets (machinery,
plant, building, land or any rights in buildings or land) on shifting of the industrial
undertaking from an urban area to any SEZ would be exempt from capital gains tax.
The exemption would be allowable if within one year before or three years after such
transfer:
 Machinery or plant is purchased for the purposes of business of industrial undertaking
in SEZ by the assessee.
 Assessed has acquired land or building or has constructed building for the purposes of
business in SEZ.
 The original assets are shifted and establishment of the industrial undertaking is
transferred to SEZ; and other specified expenses are incurred.
 The amount of exemption for capital gains would be restricted to the costs and
expenses incurred in relation to all or any of the purposes mentioned above.

Part-2 Income Tax incentives for SEZ Developer

 Tax holiday for SEZ developers- A new section 80-IAB has been introduced in the IT
Act vide SEZ Act, 2005 whereby a deduction of 100 percent of profits derived from
the business of developing SEZ (notified on or after April 1, 2005) would be available
to developer of SEZ for any 10 consecutive years out of 15 years beginning from the
year in which SEZ has been notified.
  Exemption under section 10(23G) that was available to infrastructure capital fund or a
cooperative bank on interest and long term capital gains investment had been
extended to investment made by SEZ developers qualifying for tax holiday under
section 80-IAB of the IT Act. However, this exemption has been withdrawn with
effect from assessment year 2007-08.
 Exemption from Dividend Distribution Tax ("DDT")- No DDT would be payable by a
developer of SEZ on dividend declared, distributed or paid on or after April 1, 2005
out of current income.
 Exemption from MAT- Any income earned on or after April 1, 2005 by a SEZ developer
would be exempt from MAT under section 115JB of the Act.from Domestic Tariff Area
(DTA) to SEZ.

Foreign Direct Investments

 100% FDI is freely allowed in manufacturing sector in SEZ units under automatic route,
except arms and ammunition, explosive, atomic substance, narcotics and hazardous
chemicals, distillation and brewing of alcoholic drinks and cigarettes, cigars and
manufactured tobacco substitutes.
 No cap of foreign investments for SSI reserved items.

Off-Shore Banking Units (OBUs)

 Setting up of OBUs allowed in SEZs.

 OBUS are entitled for 100% income tax exemption for 3 years and 50% for next 2 years.

Banking / External Commercial Borrowings (ECBs)

 ECBs by units up to US$ 500 million a year allowed without any maturity restrictions.
 Freedom to bring in export proceeds without any time limit.
 Flexibility to keep 100% of export proceeds in EEFC account and freedom to make
overseas payment from such account.
 Exemption from interest rate surcharge on import finance.
 SEZ units allowed to write-off unrealized export bills.
 Exemption from interest rate surcharge on import finance.

Service Tax

 Exemption from service tax to SEZ units.

Sales to DTA

DTA sales can be undertaken subject to achievement of positive NFE. Net Foreign Exchange
(NFE) shall be calculated cumulatively for a period of 5 years from the commencement of
commercial production.

For the purpose of calculation, the value of imported capital goods shall be amortized as
follows -

 1st – 2nd year: 5% each year.

 3rd – 5th year: 10% each year
 6th – 8th year: 20% each year
 Exemption from capital gains on transfer of an industrial unit from urban area to a SEZ.
 Drawback or such other benefit as may be admissible from time to time on goods and
services admitted from the DTA for setting up, operation and maintenance of units.
 All exports from the DTA to the Zone shall be exempt from state and local body taxes or
levies as (In some states, exports made to educational institutions, hospitals, hotels,
residential and / or commercial complexes, leisure and entertainment facilities or any
other facilities as may be notified by the state government are not exempt).
 Developers of SEZs may import or procure goods from DTA without payment of duty for
development, operation or maintenance of SEZ.
 Exemption from Central Sales Tax (CST) on supply of goods from the DTA for
development, operation and maintenance of SEZs.
 Income tax exemption for a block of 10 years in the first 15 years of operation.
 Drawback or such other benefits as may be admissible from time to time on supply of
goods from DTA for development, operation and maintenance of SEZs.
 Investment income in the form of dividends, interest or long term capital gains, of an
infrastructure capital company from investments made in an enterprise engaged in the
development, operation or maintenance of a SEZ are exempt from tax.
 Foreign investment permitted.
 Service tax exemption on services provided to a developer or to a unit located in the SEZ
region.
 Any activity or transaction in the Zone, which is liable for entertainment duty under the
Bombay Entertainments Duty Act, 1923 and Luxury Tax under the Maharashtra Tax on
Luxuries Act, 1987 shall not be liable to such tax The fiscal benefits shall be applicable for
a period of 25 years from the date of notification of the zone by the Government of
India or such extended period as may be decided by the State Government
 With respect to each Special Economic Zone all such transactions between the Zones or
within the Zone or both, including the transactions of land acquisition for development
of the Zone between the developer or co-developer and land owners and land
transactions between the developers or co-developers and the units, carried out after
declaration of the Zone by the Government of India, shall be exempt from the following
State taxes, cess and levies namely:
 Purchase tax, Sales tax and Turnover tax
 Specified sales (Lease tax) in respect of lease of goods
 Stamp duty for the first transaction between the Developer or co-developer and the
land-owner and the first transaction between the Developer or co-developer and the
Units
 Registration fee for the first transaction between the Developer or co-developer and the
land-owner and the first transaction between the Developer or co-developer and the
Units
 Land assessment tax
 Electricity duty and tax (Only for sales to Units in processing area)
 Water pollution cess
 Works Contract tax
 State government shall –
 Provide exemption from electricity duty or taxes on sale of self generated or purchased
electric power for use in processing area of an SEZ.
  Allow generation, transmission, distribution of power within a SEZ subject to the
provisions of the electricity act

Exemptions in Matters Related to Environment

 SEZs permitted to have non-polluting industries in IT and facilities like golf courses,
desalination plants, hotels and non-polluting service industries in the Coastal Regulation
Zone area.
 SEZ units are exempted from public hearing under Environment Impact Assessment
Notification.

Company Act

 Enhanced limit of INR 2.4 cores per annum is allowed for managerial remuneration.
 Agreement to opening of Regional office of Registrar of Companies in SEZ.
 Exemption from requirement of domicile in India for 12 months prior to appointment as
Director.

Drugs and Cosmetics

 Exemption from port restriction under Drugs & Cosmetics Rules.

 Sub-Contracting / Contract Farming.
 SEZ units may sub-contract part of production or production process through units in the
Domestic Tariff Area or through other EOU / SEZ units.
 SEZ units may also sub-contract part of their production process abroad.

Labor Laws

Normal Labor Laws are applicable to SEZs, which are enforced by the respective State
Governments. However, State Governments have been requested to simplify the procedures /
returns and for introduction of a single window clearance mechanism by delegating appropriate
powers to Development Commissioners of SEZ