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Special Economic Zones in India

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SEZ AND WORLD TRADE

SEZ exports in 2000 : 850 billion

• China : 45%

• Indonesia : 10%

• Philippines : 57%

• Costa Rica : 56%

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ROLE OF SEZS IN INDIAN ECONOMY

• to provide internationally competitive environment

• to increase share in global exports

• to encourage FDI and enhance GDP

• to act as laboratories for changes in our policies.

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OUR APPROACH

• Special fiscal regime, to attract private investments for developers

• GOI and SG to develop the external infrastructure

• Attractive facilities for setting up units

• Key role for State Government and private sector in the development of SEZs

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OUR APPROACH (contd.)

• Deregulation and single window for State and Central laws

• Legal framework : windows in existing laws leading to Special Central and State legislation for SEZ

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LEGAL AND POLICY FRAMEWORK- AN UPDATE

• Developer of SEZ

• Units in SEZs

• DTA supplier

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DEVELOPER OF SEZ

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FACILITIES NOTIFIED FOR DEVELOPERS OF SEZs

• 100% FDI allowed for:

(b) townships with residential, educational and recreational facilities

(b) franchise for basic telephone service in SEZ.

• Income Tax exemption to developers for any block of 10 years in 15 years

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FACILITIES NOTIFIED FOR DEVELOPERS OF SEZs (Contd)

• Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs

• Exemption from Service Tax and the Central Sales Tax

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FACILITIES NOTIFIED FOR DEVELOPERS OF SEZs (Contd)

• Income of infrastructure capital fund/co. from investment in SEZ exempt from Income Tax

• Investment made by individuals etc in a SEZ also eligible for exemption under section 88 of Income Tax Act

• Developer permitted to transfer infrastructure facility for Operation and Maintainence, inclusive of Income Tax benefits

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FACILITIES NOTIFIED FOR DEVELOPERS OF SEZs (Contd)

• Guidelines issued on generation, transmission and distribution of power in SEZs

• Allocation of power to SEZs from central quota

• Freedom in allocation of space and built up area to approved SEZ units on commercial basis.

• Authorised to provide and maintain services like water, electricity, security, restaurants and recreation centres on commercial lines.

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UNITS IN A SEZ

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FACILITIES NOTIFIED FOR SEZ UNITS

• No license required for import.• In addition to manufacturing, trading

and services also allowed.• Freedom to subcontract.

• Single window approval by Development Commissioner of the zone.

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

• No license needed to manufacture items reserved for SSI sector

• 100% FDI allowed in manufacturing through automatic route except in sectors such as defense, atomic energy.

• No cap on foreign investments for items reserved for SSI.

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

Under FEMA

• Guidelines issued by RBI in Nov 2002 for setting up Off-shore Banking Units in SEZs.

• External commercial borrowings by units allowed without any maturity restrictions.

• Freedom to bring in export proceeds without any time limit

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

Under FEMA (contd.)

• Freedom to make overseas investment

• Insurance outside India allowed • Capitalisation of import payables• Commodity hedging permitted.

• Foreign cos permitted to set up branches for manufacturing activities

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

Customs and Excise :• Duty free import or domestic

procurement of goods for development, operation and maintenance of SEZ units.

Central Sales Tax Act :• Exemption to sales made from Domestic

Tariff Area to SEZ units.

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

Income Tax Act:• 100% IT exemption (10A) for first 5 years,

50% for 2 years thereafter and 50% of reinvestment for 3 years

• Permitted to carry forward losses• Offshore Banking Units allowed to have full

IT exemption for 3 years and 50% for next two years.

Service Tax:

• Exemption from Service Tax to SEZ units.

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

Environment • Permitted facilities like golf

courses, de-salination plants, hotels and non-polluting service industries in the Coastal Regulation Zone area

• Exemption from public hearing under Environment Impact Assessment Notification.

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

Drugs and Cosmetics :• Exemption from port restriction

under Drugs & Cosmetics Rules

• Single window mechanism in Zones having such units

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FACILITIES NOTIFIED FOR SEZ UNITS (Contd.)

Companies Act :• SEZ to have Regional office of Registrar of

Companies.

• Exemption from requirement of domicile in India for 12 months prior to appointment as Director.

• Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration

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FACILITIES NOTIFIED FOR DTA SUPPLIER

Supplies from Domestic Tariff Area (DTA) to SEZ to be treated as physical export under IT, Customs and CST Act

DTA supplier entitled to :• Drawback/DEPB• CST Exemption • Exemption from State levies

• Discharge of its EP• IT exemption u/s 80HHC

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PROGRESS – STATE POLICY

• AP ,UP, Maharashtra, Madhya Pradesh, Gujarat , Karnataka , Rajasthan and TN announced SEZ Policy.

• Enabling notifications issued by Maharashtra, MP, AP, Rajasthan and UP

• UP and MP have enacted State SEZ Act ; Gujarat and Maharashtra likely to do in near future

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FEATURES OF STATE SEZ POLICY:

• Exemption from state sales tax /VAT and other state levies

• Exemption from electricity duty

• Single window approval for state level clearances

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FEATURE OF STATE SEZ POLICY (Contd.)

• Declaration of Development Commissioner as Labour Commissioner under the Industrial Disputes Act.

• Simplification of returns and inspection systems.

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COMMITMENTS FOR THE IMMEDIATE FUTURE

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GOVERNMENT OF INDIA

• Enactment of Central SEZ Act

• Exemption of the SEZs from restrictive labour laws

• Facilitation of external infrastructure needs

• Special emphasis on sector specific and port based

SEZs

• Domestic and External marketing of SEZs

• Working with State Governments for State

SEZ legislation

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PROGRESS-PHYSICAL

All 8 EPZs converted into SEZs :-

• Kandla ( Gujarat) : 1965 (625 Acres)• Seepz( Maharashtra) : 1975 (110 Acres)• Noida (U P) : 1986 (310 Acres)

• Madras ( T N) : 1986 (262 Acres) • Cochin ( Kerala ) : 1986 (103 Acres)• Falta ( W B) : 1986 (280 Acres)• Visakhapatnam( AP) : 1994 (360 Acres)• Surat ( Gujarat ) : 1998 (103 Acres)

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PROGRESS-PHYSICAL (contd)

Formal Approvals Given to SEZs

• Indore ( Madhya Pradesh)

• Navi-Mumbai (Maharashtra)

• Sitapura (Jaipur)

• Positra (Gujarat)

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15 SEZ approved in principle:

• Maha-Mumbai ( Maharashtra )• Vallarpadam/Puthuvypeen (Kerala)• Moradabad (U.P.)• Jodhpur(Rajasthan) • Nangunery ( T N)

• Paradeep & Gopalpur (Orissa)• Kulpi and Salt Lake (W B)• Bhadohi, Kanpur, Greater NOIDA• Visakhapatnam and Kakinada, (A P) • Hassan ( Karnataka)

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FOR DETAILS VISITFOR DETAILS VISITWWW.SEZINDIA.NIC.INWWW.SEZINDIA.NIC.IN

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