WHAT IS A SEZ?

• delineated duty free enclave

• deemed to be foreign territory for the
purposes of trade operations and duties
and tariffs
• SEZ units may be set up for manufacture
of goods and rendering of services
• SEZ unit shall be a positive Net Foreign
exchange Earner
 Special Economic Zones
• Goods and services going into the SEZ area
from DTA – exports
• Goods coming from the SEZ area into DTA –
imports
• SEZ unit may import/procure from the DTA
without payment of duty all types of goods and
services.
• SEZ unit may sell goods, including by-products,
and services in DTA in accordance with the
import policy in force, on payment of applicable
duty
 Entitlement for Supplies from the
DTA
•Supplies from DTA to SEZ shall be entitled
for the following: 
i) Drawback
Or
DEPB in lieu of Drawback
(ii)Discharge of Export performance,
if any, on the supplier
 Special Economic Zones

SEZ designed for development of integrated world class

infrastructure for exports

Facilities to be made available in Special Economic Zone

apart from processing zones :

roads, airports, ports, transport system, generation and

distribution of power, telecom, hospitals, hotels,
educational institutions, leisure and entertainment units,
residential/industrial/commercial complexes, water supply
sanitation and sewerage system and any other facility
required for development of the Zone
 Special Economic Zones

Special Economic Zones may be developed and managed

by

private sector companies or

State Government jointly with a private agency or

exclusively by the State Government or their agencies.

In the case of privately developed zones, the investors

could be either Indian individuals, NRIs, Indian or foreign
companies
 Criteria for approval
(i) Minimum size of the SEZ shall not be less than 1000 hectares.
not applicable to
existing EPZs converted into SEZs
product specific SEZs or
port/airport based SEZs, on a case to case basis.

(ii) The SEZ and units therein 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 and
such other laws/rules and regulations as may be locally applicable.

(iii) Such SEZ shall make adequate arrangements to fulfill all the
requirements of the laws, rules and procedures applicable to such SEZ.

(iv) Only units approved under the SEZ Scheme would be permitted to be
located in these SEZs. At least 25 % area of the SEZ shall be used for
developing industrial area for setting up of such units.
 Procedure for Approval
Applications along with a project report to be submitted to the Chief Secretary of
the State

Recommendations Within 45 days of receiving the application

Department of Commerce, Government of India

Acceptance of the proposal by the BOA

Within 45 days of BOA recommendation

Letter of Permission to the "developer"

 Special Economic Zones
Notified SEZ Area

Land in processing area

To be leased to units for
Manufacturing purposes

Non Processing
Processing Area
Area

Land in non processing area to be utilised to business or socail purpose like

hospitals, Educational Institutions, Hotels etc.
 Special Economic Zones
• A designated duty free enclave to be treated as foreign
territory only for trade operations and duties and tariffs.
• No licence required for import.
• Manufacturing, trading or service activities allowed.
• SEZ units to be positive net foreign exchange earner within
three years.
• Domestic sales subject to full customs duty and import
policy in force.
• Full freedom for subcontracting.
• Duty-free goods to be utilised over the approval period of 5
years.
• No routine examination by customs authorities of
export/import cargo.
• Minimum size of multi-product SEZ, not to be less than
1000 hectares.
 India’s Policy on SEZs

• Duty-free import/domestic procurement of goods for

development, operation, and maintenance of SEZs and SEZ
units.
• Extension of income tax benefits under Section 80 IA of the
Income Tax (IT) Act to SEZ developers for a block of 10
years in 15 years, as per the choice of the developers.
• 100% income tax exemption for SEZ units under Section
10A of the IT Act for the first 5 years, 50% for 2 years
thereafter, and 50% of the ploughed back export profit for
the next 3 years.
• 100% income tax exemption for 3 consecutive years and
50% for the next 2 years to off-shore banking units set up in
Special Economic Zones.
 India’s Policy on SEZs

• External commercial borrowing by SEZ units without any

maturity restrictions through recognized banking channels.
• Treating supplies from the Domestic Tariff Area (DTA) to
SEZ at par with physical exports.
• Exemption from Central Sales Tax on sales made from the
DTA to SEZs.
• Exemption from Service Tax for SEZ units and developers.
• Exemption from State taxes and levies, as notified by
various State Governments.
 Administrative set up for SEZs
The functioning of the SEZs governed by a three tier
administrative set up –

(i)the Board of Approval is the apex body in the Department,

(ii) the Unit Approval Committee at the Zonal level dealing
with approval of units in the SEZs and other related issues,
and
(iii) each Zone is headed by a Development Commissioner,
who is also heading the Unit Approval Committee.

The performance of the SEZ units are monitored annually by

the Unit Approval Committee and units are liable for penal
action under the provision of Foreign Trade (Development
and Regulation) Act, in case of violation of the conditions of
the approval
eight EPZs located at Kandla and Surat (Gujarat), Santa Cruz
(Maharastra), Cochin (Kerela), Madras (Tamil Nadu), Noida
(UP), Falta (West Bengal), and Vishakapatnam (Andhra
Pradesh) which have been converted into SEZs