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 The Government of India had announced a SEZ scheme in April, 2000 with a
view to provide an internationally competitive environment for exports. The
objectives of SEZs include making available goods and services free of taxes
and duties supported by integrated infrastructure for export production,
expeditious and single window approval mechanism and a package of
incentives to attract foreign and domestic investments for promoting exportled
growth.
In order to give a long term and stable policy framework with minimum
regulatory regime and to provide expeditious and single window clearance
mechanism, the Special Economic Zones Act, 2005 has been brought into
effect along with the Special Economic Zones Rules, 2006 from 10 February
2006.
The Act and the Rules together aim to provide a single self contained
legislation governing the operations of SEZs and replaces the hitherto
applicable legislations and rules governing the operations of SEZ in India.
Under the Act, SEZ could be set up either jointly or severally by the Central
Government, State Government, or any person (including a private or public
limited company, partnership or proprietorship) for the following purposes:
- manufacture of goods; or
- rendering services; or
- both manufacturing of goods and for rendering services; or
- as a Free Trade and Warehousing Zone.
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The SEZ Act 2005 envisages key role for the State Governments in Export
Promotion and creation of related infrastructure. A Single Window SEZ
approval mechanism has been provided through a 19 member interministerial
SEZ Board of Approval (BoA). The applications duly recommended by the respective State Governments/UT Administration are considered by this BoA periodically. All decisions of the Board of approvals are with consensus.
The SEZ Rules provide for different minimum land requirement for different
class of SEZs. Every SEZ is divided into a processing area where alone the
SEZ units would come up and the non-processing area where the supporting
infrastructure is to be created.
The SEZ Rules provide for:
- Simplified procedures for development, operation, and maintenance of
the Special Economic Zones and for setting up units and conducting
business in SEZs;
- Single window clearance for setting up of an SEZ;
- Single window clearance for setting up a unit in a Special Economic
Zone;
- Single Window clearance on matters relating to Central as well as State
Governments;
- Simplified compliance procedures and documentation with an
emphasis on self certification
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Approval mechanism
The developer submits the proposal for establishment of SEZ to the concerned
State Government. The State Government has to forward the proposal with
its recommendation within 45 days from the date of receipt of such proposal
to the Board of Approval. The applicant also has the option to submit the
proposal directly to the Board of Approval.
The Board of Approval has been constituted by the Central Government in
exercise of the powers conferred under the SEZ Act. All the decisions are
taken in the Board of Approval by consensus. The Board of Approval has 19
Members.
Administrative set up
The functioning of the SEZs is governed by a three tier administrative set up.
The Board of Approval is the apex body and is headed by the Secretary,
Department of Commerce. The Approval Committee at the Zone level deals
with approval of units in the SEZs and other related issues. Each Zone is
headed by a Development Commissioner, who is ex-officio chairperson of the
Approval Committee.
Once an SEZ has been approved by the Board of Approval and Central
Government has notified the area of the SEZ, units are allowed to be set up in
the SEZ. All the proposals for setting up of units in the SEZ are approved at
the Zone level by the Approval Committee consisting of Development
Commissioner, Customs Authorities and representatives of State
Government. All post approval clearances including grant of importerexporter
code number, change in the name of the company or implementing
agency, broad banding diversification, etc. are given at the Zone level by the
Development Commissioner. The performance of the SEZ units are
periodically monitored by the 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. Top
Incentives and facilities offered to the SEZs
The incentives and facilities offered to the units in SEZs for attracting
investments into the SEZs, including foreign investment include:-
- Duty free import/domestic procurement of goods for development,
operation and maintenance of SEZ units
- 100% Income Tax exemption on export income for SEZ units under
Section 10AA of the Income Tax Act for first 5 years, 50% for next 5
years thereafter and 50% of the ploughed back export profit for next 5
years.
- Exemption from minimum alternate tax under section 115JB of the
Income Tax Act.
- External commercial borrowing by SEZ units upto US $ 500 million in
a year without any maturity restriction through recognized banking
channels.
- Exemption from Central Sales Tax.
- Exemption from Service Tax.
- Single window clearance for Central and State level approvals.
- Exemption from State sales tax and other levies as extended by the
respective State Governments.
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The major incentives and facilities available to SEZ developers include:-
- Exemption from customs/excise duties for development of SEZs for
authorized operations approved by the BOA.
- Income Tax exemption on income derived from the business of
development of the SEZ in a block of 10 years in 15 years under Section
80-IAB of the Income Tax Act.
- Exemption from minimum alternate tax under Section 115 JB of the
Income Tax Act.
- Exemption from dividend distribution tax under Section 115O of the
Income Tax Act.
- Exemption from Central Sales Tax (CST).
- Exemption from Service Tax (Section 7, 26 and Second Schedule of the
SEZ Act).
- Exemption from Capital Gains - Capital gains arising on transfer of
assets (machinery, plant, building, land or any rights in buildings or
land) on shifting of the industrial undertaking from an urban area to
any SEZ would be exempt from capital gains tax.
Other incentives:
Environment Protection Act: Information Technology SEZ does not require
environment clearance for development of SEZ. Public hearing is not
exempted process of Environment impact assessment (EIA) as laid in the
notification of the ministry of Environment would have to be adhered to.
Companies Act: Enhanced limit of Rs. 2.4 crores p.a. allowed for managerial
remuneration. Exemption from requirement of domicile in India for 12
months prior to appointment as Director.
Employees Provident Fund: As per the Ministry of Labour, the state
government may apply for exemption to the Central Government under
section 16(2) of the Employees Provident Fund & Miscellaneous Provision Act
1952 from the applicability of the provision of the said Act for 5 years.
Drugs & Cosmetics Act: Exemption from Port Restriction under Drug &
Cosmetics Rules.
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Service Offered By us
Regulatory Support
- Approval of SEZ (Settling application before BOA, preparation of project report,
facts sheet in case of conversion etc.)
- Approval of letter of permission (LOP) / renewal of letter of permission
- Approval of green card
- Approval of Import Export Code Number
- Permission for inter-unit transfer of capital goods
- Permission for disposal of waste and scrap
- Approval for enhancement of production capacity
- Permission for additional location / change of location
- Permission for sale of rejects
- Permission for sale of DTA sale
- Assisting in claiming Duty Drawback
- Assisting in claiming DEPB
- NOC for de bonding of materials
- NOC for de bonding of premises
Top Compliance Support
- Structuring of contracts/transactions to optimize indirect tax incidence
- Formulating indirect tax efficient business models
- Conducting VAT impact assessment studies
- Undertaking comprehensive reviews of business operations
- Advice on classification, valuation, applicability of taxes on transactions and
admissibility to tax benefits/exemptions
- Identification of innovative tax planning opportunities
- Preparations of customized compliance manuals on all taxes
- Single point contact & centralized coordination for tax payments, filing of returns &
compilation of documents
Litigation Support and Representations
- Drafting appeals & submissions
- Appearances & arguments before adjudication & appellate authorities
- Briefing Senior Counsel on need basis
- Representation before relevant Government authorities on tax & trade policy
issues
- Developing economic justification for tariff/non-tariff concessions
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