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| 1. |
What is a Special Economic Zone ?
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.
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| 2. |
Where in India SEZs are located ?
At present there are 552 formally approved SEZs and 274 notified SEZs in various states.
For a complete list click here.
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| 3. |
Who can set up SEZs?
Any private/public/joint sector or State Government or its agencies can set up Special Economic Zone (SEZ).
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| 4. |
Can Foreign Companies set up SEZs ?
Yes.
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| 5. |
Are there any terms & conditions for setting up of SEZ ?
Yes. These are detailed in Special Economic Zone Act, 2005, Special Economic Zone Rules 2006 as amended from time to time as well as other government communication.
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What is role of State Governments?
State Governments will have a very important role to play in the establishment of SEZ. Representative of the State Government, who is a member of the Inter-Ministerial Committee on private SEZ, is consulted while considering the proposal. Before recommending any proposals to the Ministry of Commerce & Industry (Department of Commerce), the States must satisfy themselves that they are in a position to supply basic inputs like water, electricity, etc.
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| 7. |
What are the tax Incentives available to SEZ Developer ?
Income tax:-
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- 100% income tax exemption for any 10 consecutive assessment years in the first 15 assessment years Section 80 IAB
- Exemption from Dividend Distribution Tax
- No MAT (Minimum Alternate Tax)
- Transferee Developer enjoys 100% income tax exemption for balance period of 10 assessment years
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Indirect taxes:- |
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- SEZ Developer may import or procure from the domestic sources
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Duty free, all its requirements of capital goods, raw materials,
consumables, spares, packaging materials, office equipment, DG sets
etc. for implementation of its project without any licence or specific
approval. |
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- No import duty on these goods imported
- No excise duty on these goods procured from DTA (Domestic Tariff Area)
- No service tax on services availed from DTA (Domestic Tariff Area)
- No Value Added Tax (VAT) and Central Sales Tax (CST) on goods procured from DTA (Domestic Tariff Area)
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| 8. |
What is the obligation of the Unit under the Scheme? |
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- The units proposed to be set up in SEZ can be manufacturing or service providers or trading units or warehousing units depending upon the type of
SEZ
- SEZs are basically to promote exports and therefore units in SEZs should be
capable of achieving exports. Domestic sales (to units in DTA) are allowed, but
subject to all duties and taxes
- A basic condition for all units in SEZ is that the unit should be a Net Foreign
Exchange (NFE) earner. It means that in a block of five years, its Foreign
exchange earning should exceed its Foreign exchange outgo
- If the SEZ developer or units in SEZ seek FDI (Foreign Direct Investment),
FDI policies and procedures must be complied with. These are in addition to
SEZ policies and procedures which are common, whether with or without FDI
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| 9. |
What are the tax and other incentives available to SEZ units?
Income tax:- |
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- Deduction from Profits and Gains from export of goods/services as follows (Section 10AA)
100% income tax exemption for first 5 years
50% income tax exemption for next 5 years
Income tax exemption for next 5 years to the extent of profits
Reinvested (Maximum 50%)
- Exemption from Dividend Distribution Tax
- No MAT (Minimum Alternate Tax)
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Indirect taxes:- |
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- No import duty on goods imported
- No excise duty on goods procured from DTA (Domestic Tarrif Area)
- No service tax on services availed from DTA (Domestic Tarrif Area)
- No Central Sales Tax (CST) on goods procured from DTA (Domestic Tarrif Area)
- Service tax, VAT, Central Sales Tax exemptions on exports
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Other taxes, levies, duties:- |
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- Exemptions from State and local , duties and levies
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Other incentives / concessions for SEZ units:- |
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- Single point clearance to the SEZ unit under various State Acts and Rules
- External Commercial Borrowings (ECB) by units upto $500 million a year allowed without any maturity restrictions
- Freedom to bring in export proceeds without any time limit
- Flexibility to keep 100% of export proceeds in EEFC account
- SEZ units allowed to write off unrealised export bills
- SEZ units may sub-contract part of production or production process through units in DTA/another SEZ/EOU units
- SEZ units may sub-contract part of process abroad
- Inter-unit sales permitted provided payment in Foreign Currency
- Exemption from interest rate surcharge on import finance
- Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration
- Exemption from requirement of domicile in India for 12 months prior to appointment as Director
- Import or procurement from DTA permitted without any licence
- No cap on FDI for SSI reserved items
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| 10. |
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.
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| 11. |
What are the facilities for Domestic suppliers to Special Economic Zone ?
Supplies from Domestic Tariff Area (DTA) to SEZ to be treated as physical export. DTA supplier would be entitled to:- |
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- Drawback/DEPB
- CST Exemption
- Exemption from State Levies
- Discharge of EP, if any on the suppliers
- Income Tax benefit as applicable to physical export
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| 12. |
Who monitor the functioning of the units in SEZ ?
Performance of the SEZ units monitored by a Committee consisting of Development Commissioner, Custom and representative of State Govt. on annual basis.
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Are SEZ's controlled by Government ?
In all SEZs , the statutory functions are controlled by the Government.
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What about the Licenses for Imports?
Yes, it is possible to use foreign brand names/trade marks in India. However, lump sum fee is not permissible, only running royalty payment is permissible as per prescribed rate.
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What is the practical role of Development Commissioner?
Development Commissioner is the nodal officer for SEZs and helps in resolution of problem, if any, faced by the units/developer.
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Routine examination of goods by customs in the EOU is common.
Will the same practice continue at the SEZ?
Customs examination is to the bear minimum. SEZ units function on self certification basis.
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Will it be possible to supply to other units in SEZ?
YES. Inter Unit Sales are permitted as per the Policy. Buyer procuring from another unit pays in Foreign Exchange.
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