1 What Is A Special Economic Zone ?
1 What Is A Special Economic Zone ?
1 What Is A Special Economic Zone ?
Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be
deemed to be foreign territory for the purposes of trade operations and duties and tariffs.
At present there eight functional Special Economic Zones located at Santa Cruz
(Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu),
Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Nodia (Uttar Pradesh) in
India. Further a Special Economic Zone at Indore ( Madhya Pradesh ) os now ready for
operation.
In addition 18 approvals have been given for setting up of SEZ at Positra (Gujarat), Navi
Mumbai and Kopata (Maharashtra), Nanguneri (Tamil Nadu), Kulpi and Salt Lake (West
Bengal), Paradeep and Gopalpur (Orissa), Bhadohi, Kanpur, Moradabad and Greater
Noida (U.P.), Vishakhapatnam and Kakinada (Andhra Pradesh),
Vallarpadam/Puthuvypeen (Kerala) Hassan ( Karnataka), Jaipur and Jodhpur ( Rajasthan)
on the basis of proposals received from the State Governments.
Any private/public/joint sector or State Government or its agencies can set up Special
Economic Zone (SEZ).
Yes
15 copies of application, indicating name and address of the applicant, status of the
promoter along with a project report covering the following particulars may be submitted
to the Chief Secretary of the State:
Location of the proposed Zone with details of existing infrastructure and that
proposed to be established;
Its area, distance from the nearest sea port / airport / rail / road head etc.
Financial details, including investment proposed, mode of financing and viability
of the project.
Details of foreign equity and repatriation of dividends etc., if any
Whether the Zone will allow only certain specific industries or will be a multi-
product Zone.
The State Government shall, forward it along with their commitment to the following to
the Department of Commerce, Government of India:
That area incorporated in the proposed Special Economic Zone is free from
environmental restrictions;
That water, electricity and other services would be provided as required;
That the units would be given full exemption in electricity duty and tax on sale of
electricity for self generated and purchased power;
To allow generation, transmission and distribution of power within SEZ;
To exempt from State sales tax, octroi, mandi tax, turnover tax and any other
duty/cess or levies on the supply of goods from Domestic Tariff Area to SEZ
units;
That for units inside the Zone, the powers under the Industrial Disputes Act and
other related labour Acts would be delegated to the Development Commissioner
and that the units will be declared as a Public Utility Service under Industrial
Disputes Act.
That single point clearances system and minimum inspections requirement under
State Laws/Rules would be provided.
The proposal incorporating the commitments of the State Government will be considered
by an Inter-Ministerial Committee in the Department of Commerce. On acceptance of the
proposal, a letter of permission will be issued to the applicant.
Only units approved under SEZ scheme would be permitted to be located in SEZ.
The SEZ units shall abide by local laws, rules, regulations or bye-laws in regard to area
planning, sewerage disposal, pollution control and the like. They shall also comply with
industrial and labour laws as may be locally applicable.
Such SEZ shall make security arrangements to fulfill all the requirements of the laws,
rules and procedures applicable to such SEZ.
The SEZ should have a minimum area of 1000 hectares and at least 25 % of the area is
to be earmarked for developing industrial area for setting up of units.
Minimum area of 1000 hectares will not be applicable to product specific and port/airport
based SEZs.
Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will be an integral
part of SEZs.
State Governments will have a very important role to play in the establishment of SEZ.
Representative of the State Government, who is a member of the Inter-Ministerial
Committee on private SEZ, is consulted while considering the proposal. Before
recommending any proposals to the Ministry of Commerce & Industry (Department of
Commerce), the States must satisfy themselves that they are in a position to supply
basic inputs like water, electricity, etc.
8. What are the facilities Incentive/ Facilities to SEZ Developer ?
All approvals to be given by the Unit Approval Committee headed by the Development
Commissioner. Clearance from the Department of Policy and Promotion/Board of
Approvals, wherever required will be obtained by the Development Commissioner, before
the Letter of Intent is issued.
SEZ units have to achieve positive net foreign exchange earning as per the formula given
in paragraph Appendix 14-II (para 12.1) of Handbook of Procedures, Vol.1. For this
purpose, a Legal Undertaking is required to be executed by the unit with the
Development Commissioner.
The units have to provide periodic reports to the Development Commissioner and Zone
Customs as provided in Appendix 14-I F of the Handbook of Procedures, Vol.1.
The units are also to execute a bond with the Zone Customs for their operation in the
SEZ.
Any company set up with FDI has to be incorporated under the Indian Companies Act
with the Registrar of Companies for undertaking Indian operations
SEZ units may import or procure from the domestic sources, duty free, all their
requirements of capital goods, raw materials, consumables, spares, packing materials,
office equipment, DG sets etc. for implementation of their project in the Zone without
any licence or specific approval.
Goods imported/procured locally duty free could be utilised over the approval period of 5
years.
Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the
transaction value.
Income tax :
100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
Reinvestment allowance to the extend of 50% of ploughed back profits
Carry forward of losses
100% foreign direct investment is under the automatic route is allowed in manufacturing
sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics
and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes ,
cigars and manufactured tobacco substitutes.
OBU's allowed 100% Income Tax exemption on profit for 3 years and 50 % for next two
years.
External commercial borrowings by units up to $ 500 million a year allowed without any
maturity restrictions.
Flexibility to keep 100% of export proceeds in EEFC account. Freedom to make overseas
investment from it.
Service Tax:
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
Companies Act :
Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration
Sub-Contracting/Contract Farming :
SEZ units may sub-contract part of production or production process through units in the
Domestic Traiff Area or through other EOU/SEZ units
SEZ units may also sub-contract part of their production process abroad.
Normal Labour Laws are applicable to SEZs, which are enforced by the respective state
Governments. The state Government 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 SEZs.
14.What are the facilities for Domestic suppliers to Special Economic Zone
Supplies from Domestic Tariff Area (DTA) to SEZ to be treated as physical export. DTA
supplier would be entitled to :
Drawback/DEPB
CST Exemption
Exemption from State Levies
Discharge of EP if any on the suppliers
Income Tax benefit as applicable to physical export under section 80 HHC of the
Income Tax Act.
In all SEZ's , the statutory functions are controlled by the Government. Government also
controls the operation and maintenance function in the 7 Central Government controlled
SEZs. In rest of the operation and maintenance are privatised.
The units would be entitled for a package of Incentives and a simplified operating
environment
19.If one buy goods from DTA should they require to pay State Sales Tax and Excise?
No. State has exempted the sales from DTA to SEZ from local levies and taxes.
Development Commissioner is the nodal officer for SEZs and help in resolution of
problem, if any, faced by the units / developer.
Customs examination is to the bear minimum. SEZ units function on self certification
basis.
22.What are the provisions relating to External Commercial Borrowing (ECB) in SEZ ?
External commercial borrowings by units up to $ 500 million a year allowed without any
maturity restrictions For details please see guidelines issued by RBI (F.No. 4(2)/2002-
ECB, dated 15.9.2002).
Yes. Inter Unit Sales are permitted as per the Policy. Buyer procuring from another unit
pays in Foreign Exchange.