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NEWS & EVENTS
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 FAQS
 
 
What is a Special Economic Zone ?
Who can set up SEZs ?
Are there any terms & conditions for setting up of SEZ ?
What is role of State Governments ?
What are the facilities Incentive/ Facilities to SEZ Developer ?
How to set up a unit in SEZ ?
What is the approval mechanism for the units in SEZ ?
Can Foreign Companies set up Unit in SEZ ?
What is the obligation of the Unit under the Scheme ?
What are the incentive/facilities available for Sterling SEZ units ?
Whether SEZs have been exempted from Labour Laws ?
What are the facilities for Domestic suppliers to Special Economic Zone ?
Who monitor the functioning of the units in SEZ ?
Are SEZs controlled by Government ?
What are the special features if we come to Sterling SEZ ?
What about the Licenses for Imports ?
If one buy goods from DTA should they require to pay State Sales Tax and Excise ?
What is the practical role of Development Commissioner ?
Routine examination of goods by customs in the EOU is common. Will the same practice continue at the  SEZ ?
What are the provisions relating to External Commercial Borrowing (ECB) in SEZ ?
Will it be possible to supply to other units in SEZ ?
 
 
 
 
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, duties and tariff.
 
Who can set up SEZs ?
 
Any private/public/joint sector or The State Government or its agencies can set up Special Economic Zone (SEZ).
 
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 SEZ should have a minimum area of 1000 hectares and at least 25 % of the area is to be earmarked for developing industrial area for setting up of units.
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.
 
What is role of State Governments ?
 
The 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.
 
What are the facilities Incentive/ Facilities 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.
  • Income of infrastructure capital fund/company from investment in SEZ exempt from Income Tax.
  • Investment made by individuals etc in a SEZ co also eligible for exemption u/s 88 of IT Act.
  • Developer permitted to transfer infrastructure facility for operation and maintenance.
  • Generation, transmission and distribution of power in SEZs allowed.
  • Full freedom in allocation of space and built up area to approved SEZ units on commercial basis.
  • Authorised to provide and maintain service like water, electricity, security, restaurants and recreation centres on commercial lines.
 
How to set up a unit in SEZ ?
 
For setting up a manufacturing, trading or service units in SEZ, 3 copies of project proposal in the format prescribed at Appendix 14-IA of the Handbook of Procedures, Vol.1 to be submitted to the Development Commissioner of the SEZ.
 
What is the approval mechanism for the units in SEZ ?
 
All approvals to be given by the Unit Approval Committee headed by the Development Commissioner. Clearance from the Department of Policy and Promotion/Board of Approvals, wherever required will be obtained by the Development Commissioner, before the Letter of Intent is issued.
 

Can Foreign Companies set up Unit in SEZ ?
 
Yes. Through Automatic Approval Route.
 
What is the obligation of the Unit under the Scheme ?
 
SEZ units have to achieve positive net foreign exchange earning as per the formula given in paragraph Appendix 14-II (para 12.1) of Handbook of Procedures, Vol.1. For this purpose, a Legal Undertaking is required to be executed by the unit with the Development Commissioner.
The units have to provide periodic reports to the Development Commissioner and Zone Customs as provided in Appendix 14-I F of the Handbook of Procedures, Vol.1.
The units are also to execute a bond with the Zone Customs for their operation in the SEZ
Any company set up with FDI has to be incorporated under the Indian Companies Act with the Registrar of Companies for undertaking Indian operations.
 
What are the incentive/facilities available for Sterling SEZ units ?
 
Following incentive/ facilities to SEZ enterprises:
 
Customs and Excise:
 
SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any licence or specific approval.
 
Duty free import/domestic procurement of goods for setting up of SEZ units.
 
Goods imported/procured locally duty free could be utilized 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.
 
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.
 
OBUs 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.
 
Freedom to bring in export proceeds without any time limit.
 
Flexibility to keep 100% of export proceeds in EEFC account. Freedom to make overseas investment from it.
 
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. Income Tax Act.
 
Service Tax :
 
Exemption from Service Tax to SEZ units.
 
Environment
 
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 port restriction under Drugs & Cosmetics Rules.
 
Sub-Contracting/Contract Farming :
 
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.
 
Agriculture/Horticulture processing SEZ units allowed to provide inputs and equipments to contract farmers in DTA to promote production of goods as per the requirement of importing countries.
 
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 Governments 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.
 
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 :
  • Drawback/DEPB
  • CST Exemption
  • Exemption from State Levies
  • Discharge of EP if any on the suppliers
  • Income Tax benefits as applicable to physical export under section 80 HHC   of the Income Tax Act.
 
Who monitor the functioning of the units in SEZ ?
 
Performance of the SEZ units monitored by a Unit Approval Committee consisting of Development Commissioner, Custom and representative of State Govt. on annual basis.
 
Are SEZs controlled by Government ?
 
In all SEZs , the statutory functions are controlled by The Government. Government also controls the operation and maintenance function in the 7 Central Government controlled SEZs. In rest of the operation and maintenance are privatised.
 
What are the special features if we come to Sterling SEZ ?
 
The units would be entitled for a package of Incentives and a simplified operating environment.
 
What about the Licenses for Imports ?
 
No License is required for imports, including second hand machineries.
 
If one buy goods from DTA should they require to pay State Sales Tax and Excise ?
 
No. State has exempted the sales from DTA to SEZ from local levies and taxes.
 
What is the practical role of Development Commissioner ?
 
Development Commissioner is the nodal officer for SEZs and help in resolution of problem, if any, faced by the units / developer.
 
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.
 
What are the provisions relating to External Commercial Borrowing (ECB) in SEZ ?
 
External commercial borrowings by units up to $ 500 million a year allowed without any maturity restrictions.
 
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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