11

SEZ ACT & GUIDELINES FOR SEZ ACT & GUIDELINES FOR IMPLEMENTATION IMPLEMENTATION

22

Effect of Effect of

SEZ Act 2005, SEZ Rules 2006 SEZ Act 2005, SEZ Rules 2006 & &

Related LawsRelated Laws

33

HISTORY OF SEZ IN INDIA

The first ever Export Processing Zone The first ever Export Processing Zone

(EPZ) in Asia was set up by (EPZ) in Asia was set up by

Government of India in Kandla in Government of India in Kandla in

1965.1965.

   

44

SUCCESS STORY OF EPZ’s

Based on the success of Kandla EPZ, inthe beginning of eighties, seven more EPZs were set up in Bombay, Noida,Surat, Madras, Falta, Visakhapaptnam and Cochin..

55

FORMATION OF SEZ’s

To invite larger foreign investments inIndia, these EPZs were converted into Special Economic Zones (SEZs) in the year 2000 under a new policy announced by the Government of India. 

66

AIM OF SEZ’s

The policy intended to make these SEZs an engine for economic growth supported by quality infrastructure

complemented by an attractive fiscal package with minimum possible regulations.

77

SPECIAL ECONOMIC ZONES ACT, 2005 Promulgated on 23rd June, 2005

An Act to provide for the establishment, development and management of theSpecial Economic Zones for the promotion of exports and for matters connected herewith or incidental thereto. Enacted by Parliament in the Fifty-sixth Year of the Republic of India.

88

OVERRIDING EFFECT

Section 51

The provisions of the SEZ Act shall have effect

not withstanding anything inconsistent herewith

contained in any instrument having effect byvirtue of any law other than this Act.

99

SEZ RULES 2006

In exercise of the powers conferred by section 55 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government promulgated the SEZ Rules, 2006 vide Gazette Notification No.GSR 54 (E) dated 10 February, 2006..

1010

SINGLE WINDOW CLEARANCE

Section 14

SEZ proposals approved by Board of Approval (BOA) at New Delhi.

SEZ Units approved by Approval Committeeheaded by Development Commissionerlocally.

1111

BOARD OF BOARD OF APPROVAL (BOA)Section 8Section 8

• Secretary/Additional Secretary – MOC• 2 Joint. Secretaries, GOI dealing with revenue• 1 Joint. Secretary, GOI dealing with Economy or

Finance• About 10 Joint Secretaries, GOI dealing with

Commerce, Industrial Policy, Science & Technology, Small Scale Industries / Agro & Rural Industries, Home Affairs, Defence, Environment & Forests, Law, Overseas Indian Affairs and Urban Development.

• Nominee of State Government• Nominee of DGFT• Development Commissioner concerned• Professor in any IIM• Deputy Secretary, MOC

1212

APPROVAL COMMITEE

Section 13Section 13

• Development Commissioner• 2 Officers of Central Government• 2 Officers of Central Government

dealing with Revenue• 1 Officer of Central Government

dealing with Economy/Finance• 2 Officers of the State Government• Nominee of the Developer

1313

ADMINISTRATION OF SEZ

Rule 20Rule 20

Every Special Economic Zone shall be under the administrative control of aDevelopment Commissioner.

1414

PROCESSING AREA

Section 6

Area for activities of manufacturing of goods, or rendering Services and area exclusively for trading or warehousing purposes.

1515

NON-PROCESSING AREA

Section 6 ( C )

Area for social purposes like Residential, Schools, Hotels, Hospitals as approved

byBOA.The BOA shall decide on thesize of such facilities and areas.

1616

EXEMPTIONS AND CONCESSIONS

Section 7 & 26

Developers and Units Exempted from Developers and Units Exempted from

Customs Duty, Excise Duty, CST & Customs Duty, Excise Duty, CST & Service Service

Tax. Tax.

1717

INCOME TAX EXEMPTION

Section 27 of SEZ & Section 10AA of IT Act

• 100% for first 5 years

• 50% for next 5 years

• 50% income on re-investment for next 5 years

1818

CONCESSIONS TO CONTRACTS IN SEZ

Rule 10, 26

All Exemptions and concessions are allowed

to Contractor appointed by a Developer or

Co-developer.

1919

EXEMPTIONS FOR SOCIAL INFRASTRUCTURE IN NON-

PROCESSING AREA

Rule 11 (10) Proviso

All Exemptions available for infrastructurefor social purposes in the Special Economic Zone, as may be approved by the Board Zone,as may be approved by the Board

2020

MINIMUM AREA Section 3(8) – Rule 5

• Multi-product zone – 1000 Hectares• Exclusive for services – 100 Hectares• Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram,

Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu and Kashmir, Goa or in a Union territory – 200 Hectares.

• Specific sector or in a port or airport – 100 Hectares • Electronics hardware/software, Information Technology ES –

10 Hectares (minimum built up processing area of one lakh square meters

• Bio-technology, non-conventional energy, including solar energy equipments/cell, or gem and jewellery sectors – 10 Hectares

• Free Trade and Warehousing – 40 Hectares (with a built up area of not less than one lakh sq.m.)

2121

EQUITY IN THE ENTITY

Rule 5 (4)

The Developer or Co-Developer shall have at

least 26% of the equity in the entityproposing to create business, residential orrecreational facilities in an SEZ in case

such development is proposed to be carried outthrough a separate entity or an SPV being

acompany formed and registeredunder the Companies Act, 1956.

2222

CLEARANCE BY STATE

Rule 5 (6)Rule 5 (6)

The State Government shall, whilerecommending a proposal for setting up ofan SEZ to the Board indicate whether theproposed area falls under reserved orecologically fragile area as may be

specified by

the concerned authority.

2323

DETAILS OF LAND AREA

Rule 7

The Developer shall furnish details of the

land with proof of legal right and possession

and a certificate from the State Government

or the authorized agency that the said area

is free from all encumbrances.

2424

SEZ NOTIFICATION OF THE SEZ

Rule 8Rule 8

On acceptance of the terms and conditions

of the Letter of Approval by the Developer

the Central Government shall notify the area

as a Special Economic Zone..

2525

DETAILS FOR AUTHORISED OPERATION

Section 4 (2) – Rule 9Section 4 (2) – Rule 9

The Developer shall submit to the Board(BOA) the details of operations proposed

tobe undertaken in the SEZ at the time ofseeking approval for setting up of SEZ orthereafter.

2626

PERMISSION FOR PROCUREMENT OF ITEMS UNDER TAX

Rule 10, 12

• After getting approval for authorised operation from the BOA, the Developer shall make a list of items required duly certified by a Chartered Engineer and submit to the Approval Committee for approval.

• The Developer shall execute a Bond-cum-Legal

Undertaking in Form-D with the DC..

2727

ACCOUNTING OF GOODS

Rule 12

• The Developer shall submit a half-yearly certificate for the period ending 31st March and 30th September of every financial year regarding utilization of goods from an independent Chartered Engineer, other than the one who has given a certificate for the purpose of sub-rule (2), to Development Commissioner and Specified Officer.

• The Developer shall remove goods from the SEZ to the Domestic Tariff Area only with the permission of the Specified Officer and on payment of duty applicable on such goods.

2828

NON UTILISATION OF GOODS

Rule 25Rule 25

Where an Entrepreneur or Developer doesnot utilize the goods or services on whichexemptions have been availed, theEntrepreneur or the Developer, shall

refundan amount equal to the benefits ofexemptions and concessions availed under various Acts/Rules.

2929

TRANSFER OF GOODS

Rule 13 & 38

A Developer may export or transfer capitalgoods and spares including constructionequipment that have become obsolete orsurplus to another Developer, or Unit after obtaining the approval of the SpecifiedOfficer.

3030

PROCUREMENT FROM DTA

Rule 30Rule 30

The DTA (Domestic Tariff Area) supplier supplyinggoods to a Unit or Developer shall clear the goodsunder ARE-I referred to in notification number40/2001- Central Excise (NT) dated the 26th June,2001 in quintuplicate bearing running serial number beginning from the first day of the financial year.

3131

SALES UNDER CST ACT

Rule 32 (Proviso)Rule 32 (Proviso)

Dealer selling goods in the course of interstate trade or commerce to a registered

dealerunder the Central Sale Tax Act, 1956 shallfurnish a declaration in Form – I

prescribedunder the Central Sales Tax (Registration

andTurnover) Rules, 1957.

3232

DESTRUCTION OF GOODSRule 39Rule 39

With written prior permission from theSpecified Officer, obsolete goods includingcapital goods procured or manufactured orwaste or scrap or remnants can be

destructedwithin the SEZ.

Obtaining environmental clearance if anyrequired for such destruction shall be theresponsibility of the Unit.

3333

SUB CONTRACTING OF WORKS

Rule 41Rule 41

Part of production or any production

process can be undertaken outside SEZ

with prior permission of the Specified

Officer.

3434

SALES IN DTASALES IN DTA

Rule 47

Goods, rejects, wastes, scraps, remnants,

broken diamonds or byproducts arisingduring the manufacturing process or inconnection therewith, Can be sold onpayment of applicable duties under section 30, subject to prescribedconditions.

3535

TEMPORARY REMOVAL OF GOODS

Rule 50Capital goods, parts can be temporarily removed without payment of duty for job work, test, repair, refining and calibration and return thereof &Laptop, notebook computers, video projection systems for use by Authorized employees can also be taken out of the zone on return basis with the prior approval of the Specified Officer.

3636

PROCEDURE FOR TEMPORARY REMOVALS

Rule 51Rule 51

Removal of goods for the activities covered under

sub-rule (1) to (3) of rule 50 shall be undertaken by

the Unit on the cover of serially-numbered pre-

authenticated challans, authenticated by theManaging Director or owner or working

partner or the Company Secretary or by any person

duly authorized in this behalf by the Company or

owner or working partner.

3737

MONITORING OF UTILIZATION

Rule 15Rule 15

The utilization of the goods imported orProcured from the Domestic Tariff Area

bythe Developer shall be monitored by theApproval Committee.

3838

TRANSFER OF LETTER OF APPROVAL OF DEVELOPER

Rule 16

The Letter of Approval of a Developer can be

transferred to another Developer followingthe procedure under Section in case theBoard finds any Developer has defaulted

the terms and conditions.

3939

ESTABLISHMENT OF SEZ UNITRule 17Rule 17

A consolidated application (Form-F) seekingpermission for setting up of a Unit and otherclearances, including those indicated below,shall be made to the Development Commissioner, in Form-F, in five copies, witha copy to the Developer.

The Approval Committee may approve theproposal within15 days.

4040

DETAILS REQUIRED FOR SEZ UNIT

• Setting up of unit in a Special Economic Zone;• Annual permission for sub-contracting;• Allotment of Importer-Exporter Code number;• Allotment of land/industrial sheds in the Special Economic

Zone;• Water connection;• Registration-cum-Membership Certificate;• Small Scale Industries Registration;• Registration with Central Pollution Control Board;• Power connection;• Building approval plan;• Sales tax registration;• Approval from inspectorate of factories;• Pollution control clearance, wherever required;• Any other approval as may be required from the State

Government.

4141

ALLOTMENT OF LAND OR BUILT UP SPACE

Rule 11 (5)

The land or built up space in the processing areashall be given on lease only to the entrepreneursholding a valid Letter of Approval issued underrule 19 and the lease period shall be co-terminus with the validity of the Letter of Approval.

4242

LEASE OF LAND / SPACE

Rule 11 (5) Provision Rule 11 (5) Provision

The Developer can give land or built upspace on lease in the processing area,

forcreating facilities such as canteen,

publictelephone booths, first aid centres,

crecheand such other facilities as may be

requiredfor the exclusive use of the Unit.

4343

ALLOTMENT OF LAND BY DEVELOPER

Rule 11 (8)Rule 11 (8)

The Developer may allot land in the processing area on lease basis to a

persondesiring to create infrastructure facilities

foruse by the prospective Units.

4444

NO SALE OF LAND BY DEVELOPER

Rule 11 (9)Rule 11 (9)

The Developer shall not sell the land in a

Special Economic Zone.

4545

ALLOTMENT OF LAND BY DEVELOPER IN NON- PROCESSING AREA

Rule 11 (10)Rule 11 (10)

The Developer may allot the land in the non-processing area for business and socialpurposes such as educational institutions,hospitals, hotels, recreation andEntertainment facilities, residential andbusiness complexes as approved by the BOA.

4646

FOREIGN COMPANIES

Rule 19 (7)Rule 19 (7)

Foreign companies can also set up manufacturing

units as their branch operations in the SpecialEconomic Zones in accordance with the

provisionsof Foreign Exchange Management Regulations,2000 of RBI.

4747

TRANSFER OF GOODS

Rule 38

The goods or services admitted into SpecialEconomic Zone without payment of dutymay be transferred or given on loan to a

Unitor Developer within the same Special Economic Zone or in another SpecialEconomic Zone or to an EOU or to a unit inEHTP unit without payment of duty.

4848

NET FOREIGN EXCHANGE EARNINGS

Rule 53

The Unit shall achieve Positive Net Foreign

Exchange to be calculated cumulatively for a

period of five years from the commencement

of production.

4949

MONITORING OF PERFORMANCE

Rule 54

Performance of the Unit shall be monitoredby the Approval Committee.In case the Approval Committee come to theconclusion that a Unit has not achievedpositive NFE Earning or failed to abide byany of the terms and conditions of the Letterof Approval or Bond-cum-Legal Undertaking,the said Unit shall be liable for penal actionunder the provisions of the Foreign Trade(Development and Regulation) Act, 1992.

5050

SELF DECLARATIONRule 75

Unless otherwise specified in these rules allinward or outward movement of goods intoor from the Zone by the Unit or Developershall be based on self declaration made andno routine examination of these goods shallbe made unless specific orders of theDevelopment Commissioner or thespecified Officer are obtained.

5151

EXIT FROM SEZ

Rule 74

The Unit may opt out of SEZ subject to payment of applicable duties on the imported or indigenouscapital goods, raw materials, components,consumables, spares and finished goods in stock.

Provided that if the unit has not achieved positiveNFE, the exit shall be subject to penalty that may beimposed under the FTDR, Act, 1992.

5252

ADDITIONAL AREA IN THE SEZ

Section 4 & 5Section 4 & 5

Additional area in the SEZ will be included on following conditions:

• Generation of additional economic activity• Promotion of exports of goods and

services• Promotion of investment• Additional employment opportunities• Development infrastructure facilities• maintenance of sovereignty and integrity

of India.

5353

CHANGE OF THE ENTREPRENEUR

Rule 19

Change of Entrepreneur permitted if theincoming Entrepreneur undertakes to

takeover the assets and liabilities of the

existingunit.

5454

CANCELLATION OF APPROVAL

Section 10

The Approval Committee may, at any time,if it has any reason or cause to believe thatthe entrepreneur has persistentlycontravened any of the terms andconditions or its obligations subject towhich the letter of approval was grantedto the entrepreneur, cancel the letter of approval.

5555

SINGLE ENFORCEMENTSINGLE ENFORCEMENT AGENCY AGENCY

Section 20, 21, 22

The Single Agency or Officer, as nominated by Central

Government , may, with prior intimation to theDevelopment Commissioner concerned, carry

out theinvestigation or search or seizure in the SpecialEconomic Zone or in a Unit if such agency or

officerhas reasons to believe (reasons to be recorded

inwriting) that a notified offence has been

committedor is likely to be committed in the Special Economic Zone:

5656

OFFENCES BY COMPANIES

Section 25

Where an offence has been committed by acompany, every person, who at the time theoffence was committed was in charge of, andwas responsible to, the company for the

conductof the business of the company, as well as the company, shall be deemed to be guilty of theoffence and shall be liable to be proceededagainst and punished accordingly

5757

EXEMPTIONS FROM

GOVT OF KERALA • Stamp Duty• Registration Tax• Sales Tax (KVAT)• Entry Tax• Self Certification (Labour Laws)• Building and Profession Tax• Stability Certificate for Buildings• Development Commissioner declared

as Conciliation Officer under Industrial Disputes Act.

5858

BOA

LOA

ACCEPTANCE

SEZ NOTIFICATION

AUTHORISEDOPERATION

AC APPROVAL

BLUT

ST REGNI.E. CODE

FORM - A

FORM – ISEZ / ST

5959

POLOA & AO LIST

ARE-1 (4) / FORM - I WITH ITEMS

CUSTOMS CLEARANCE

ARE-1 CERTIFICATION

ARE-1 RETURN

CONSUMPTION STATEMENT

OBTAIN PI

CUSTOMS / STRETURN