SEZ - Frequently asked questions.
Q. What is a Special Economic
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 in India.
Q. Where SEZs are located in India ?
At present, there eight functional Special Economic Zones located at Santa Cruz (Maharashtra) ( which ic product specific) , Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal), and Noida (Uttar Pradesh) in India. Further a Special Economic Zone at Indore ( Madhya Pradesh ) is already in operation. In addition more than 150 in principle approvals have been given for setting up new SEZs across India.
Q. Who can set up SEZs?
Any private/public/joint sector or State Government or its agencies can set up Special Economic Zone (SEZ).
Q Can Foreign Companies set up SEZs ?
Q. Are there any terms & conditions for setting up of SEZ ?
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 Multi-Product SEZs should have a minimum area of 1000 hectares and at least 35 % ( now it is proposed to increase it to 50% by some state governments) of the area is to be earmarked for developing industrial area for setting up of units. IT & ITES SEZs can be established in an area minimum 10 Hectares and above.
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.
Q What are the Incentive available to SEZ Developer ?
100% FDI allowed for:
(a) townships with residential, educational and recreational facilities on a case to case basis,
(b)franchise for basic telephone service in SEZ.
Income Tax benefit under ( 80 IA ) to developers for any block of 10 years in 15 years
Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs.
Exemption from Service Tax /CST.
The income of infrastructure company investing in SEZ is exempt from Income Tax.
Q. What are the incentive/facilities available for SEZ units?
Following incentive/ facilities to SEZ enterprises :
Customs and Excise :
Duty Benefits: SEZ units may import or procure from the domestic sources all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. duty free.
Duty free import/domestic procurement of goods for
setting up of SEZ units.
Goods imported / procured locally duty free could be utilised over the approval period of 5 years.
Domestic sales by SEZ units will now be exempt from SAD.
Domestic sale of finished products, by-products on
payment of applicable Custom duty.
Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value .
Income Tax Benefits:
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
Foreign Direct Investment :
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.
No cap on foreign investments for SSI reserved items.
Banking / Insurance/External Commercial Borrowings
Setting up Off-shore Banking Units allowed in SEZs.
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.
Commodity hedging permitted.
Exemption from interest rate surcharge on import finance.
SEZ units allowed to ‘write-off’ unrealized export bills.
Central Sales Tax Act :
Exemption to sales made from Domestic Tariff Area to SEZ units.
Exemption from Service Tax to SEZ units
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 Exemption from public hearing under Environment Impact Assessment Notification.
Companies Act :
Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration Agreement to opening of Regional office of Registrar of Companies in SEZs. Exemption from requirement of domicile in India for 12 months prior to appointment as Director.
Drugs and Cosmetics :
Exemption from import restriction under Drugs & Cosmetics Rules for registration of drugs prior to imports.
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.
Q. Whether SEZs have been exempted from Labour laws?
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.