Special Economic Zones - SEZ

Special Economic Zones :

Exim Policy brought in the concept of establishment of Special Economic Zones which are specially delineated duty free enclaves and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Goods going into the SEZ area shall be treated as deemed exports and goods coming into Domestic Tariff Area (DTA) from the SEZ shall be treated as if the goods are being imported.

A SEZ may be set up in the public, private, joint sector or by State Government and also existing EPZ may be converted into SEZ, if so notified.

The minimum investment in building, plant and machinery by a unit in SEZ shall be Rs. 50 lakhs (not applicable to EPZ being converted into SEZ).

SEZ units may export goods and services including agro-products, partly processed jewellery, sub-assemblies and component. It may also export by-products, rejects, waste scrap arising out of the production process.

SEZ unit may import without payment of duty all types of goods including capital goods as defined in the Policy, whether new or second hand required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC (HS). The units shall also be permitted to import goods required for the approved activity including capital goods, free of cost or on loan from clients.

SEZ units may procure goods required by it without payment of duty from bonded warehouses in the DTA set up under the Policy.

SEZ may import, without payment of duty, all types of goods for creating a central facility for use by software development units in SEZ. The central facility for software development can also be accessed by units in the DTA for export of software.

Gem & Jewellery and Jewellery units may also source gold / silver / platinum through the nominated agencies.

SEZ units may also import / procure from DTA specified goods without payment of duty and subject to such conditions as may be notified by the Government, for setting up of units in the Zone.

SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic / foreign leasing company. In such a case the SEZ unit and the domestic / foreign leasing company shall jointly file the documents to enable import / procurement of the capital goods without payment of duty.

SEZ unit shall be a positive net foreign exchange earner.

All activities of SEZ units, unless otherwise specified, shall be through self certification procedure.

The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force.

Goods imported / procured by an SEZ unit may be transferred or given on loan to another SEZ EOU / EPZ / EHTP / STP unit which shall be duly accounted for, but not counted towards discharge of export performance.

Transfers of goods within the same SEZ shall not require any permission but the unit shall maintain proper accounts of the transaction.

SEZ unit may subcontract a part of their production or production process through units in the DTA or through other SEZ / EOU / EPZ / EHTP / STP with the permission of the Customs authorities. Sub-contracting of part of production process may also be permitted abroad with the approval of the Board of Approval.

SEZ units may sell goods in the DTA on payment of applicable duties on the basis of self-certification.

Units set up in SEZs will be charged rent for lease of industrial plots and standard design factory buildings / sheds as per rates fixed from time to time.

SEZ units engaged in manufacturing and services will be eligible for entitlements in respect of payment of income tax as per the provisions of incomc Tax Act.

FOB Value of export of an SEZ unit can be clubbed with FOB value of export of its parent company in the DTA or vice versa for the purpose of according Export House, Trading House, Star Trading House or Super Star Trading House status.

Foreign Equity up to 1000% is permissible for all manufacturmg activities in Special Economic Zones (SEZs) except for the following activities.

Arms and ammunition, explosives and allied items of defence equipment, defence aircraft and warships

Atomic substances

Narcotics and psychotropic substances and hazardous chemicals

Distillation and brewing or alcoholic drinks

Cigarettes / cigars and manufactured tobacco substitutes

Sectoral norms as notified by the Government shall apply to foreign investment in services.

SEZ units may retain 100% of their export proceeds in their EEFC account.

Export value of goods and software by SEZ units may be realized and repatriated to India within 12 months from the date of export or within the time extended by Reserve Bank of India.

Software units may, in addition, also be allowed to use the computer system for training purpose (including commercial training) subject to the condition that no computer terminal shall be installed outside the Zone premises for the purpose.

Procurement of raw materials and export of finished products shall be exempt from Central levies.

Exemption from industrial licensing for manufacture of items reserved for SSI sector

Canalization policy shall not apply to SEZ manufacturing units.

Export of iron ore shall however be subject to the decision of the Government from time to time. Requirements of other conditions like minimum export price / export in consumer pack as per Exim Policy shall apply in case the raw materials are indigenous. Export of textile items shall be covered by bilateral agreements if any.

SEZ unit may install one fax machine at a place or its choice, outside the Zone, subject to intimation of its location of the concerned Customs / Central Excise authorities.

SEZ units may temporarily take out of the Zone duty free laptop computers and video projection systems for working upon by persons authorized by unit.

SEZ units may install personal computers not exceeding two in number imported / procure duty free in the registered / administrative office subject to the guide lines issued by Department of Revenue in this behalf.

For IT and IT enabled services, persons authorized by the software units may access the facility installed in the SEZ unit through communication links.

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