Assignment on Export Oriented Units and Export Promotion Schemes in India and Free Trade Zones in

Submitted by DEVIKA A A40147711003

MASTER OF BUSINESS ADMINISTRATION IN 3 CONT PROGRAM

Under the Guidance of Mrs.Sonali Banergi

Department of MBA

AMITY UNIVERSITY DUBAI

Office G 01, Block 10 Dubai International Academic City, PO Box: 345019, Dubai, UAE

2012

Export oriented units in India

The EOU Scheme introduced in early 1981, is complementary to the SEZ scheme (erstwhile EPZ scheme). It adopts the same production regime but offers a wider option in location with reference to factors like source of raw materials, port of export, hinterland facilities, availability of technological skills, existence of an industrial base, and the need for a large area of land for the project. Features No license required for import. Exemption from Central Excise Duty in procurement of capital goods, raw-materials, consumables spares etc. from the domestic market. spares etc. Exemption from customs duty on import of capital goods, raw materials, consumables Reimbursement of Central Sales Tax (CST) paid on domestic purchases. Supplies from DTA to EOUs treated as deemed exports. Reimbursement of duty paid on furnace oil, procured from domestic oil companies to EOUs as per the rate of drawback notified by the Directorate General of Foreign Trade. 100% Foreign Direct Investment permissible. Exchange earners foreign currency (EEFC) Account

Facility to retain 100% foreign exchange proceeds in EEFC Account. Facility to realize and repatriate export proceeds within twelve months. Further extension in time period can be granted by RBI and their authorized dealers. Re-export of imported goods found defective, goods imported from foreign suppliers on loan basis etc. Exemption from industrial licensing requirement for items reserved for SSI sector. Profits allowed to be repatriated freely without any dividend balancing requirement Access to Domestic Market up to 50% of FOB value of export on concessional rate of duty. Duty free goods to be utilized in two years. Further extension granted on liberal basis. Job work on behalf of domestic exporters for direct export allowed. Conversion of existing Domestic Tariff Area (DTA) unit into an EOU permitted. Can procure duty-free inputs for supply of manufactured goods to advance license holders.

Supply of ITA-I items in the domestic market which would be counted for fulfillment of NFE. EOUs in agriculture and horticulture engaged in contract farming may be permitted to take out duty free goods listed in Appendix 14-I to the fields of contact farmers for production.

Number of EXPORT ORIENTED UNITS in the Country Zone wise a) Visakhapatman Special Economic Zone b) Falta Special Economic Zone c) MEPZ - Special Economic Zone e) Cochin Special Economic Zone f) Kandla Special Economic Zone g) Noida Special Economic Zone d) SEEPZ - Special Economic Zone

Export Promotion Schemes and Incentives by Govt of India

The Export Promotion Council for EOUs and SEZs (EPCES) has been set- up to service the export promotional needs of 100% Export Oriented Units (EOUs), Special Economic Zone (SEZ) over 2900 EOUs/SEZ Units, spread all over the country. The EOUs/SEZ Units cover major Chemical, Engineering, Minerals, Granite, etc. Objective of EPCES

Units and Agri Economic Zones in the country. EPCES represents EOU/SEZ Sector, which has industrial sectors, like Textiles, Garments & Yarn, Food & Agro Products, Electronics & Software,

To promote exports from India and to earn more foreign exchange for the country. To facilitate interaction between the exporting community and government both at the Central and State level. To canalize financial assistance rendered by the Central Government to members for assisting their export market development efforts. To collaborate with other Export Promotion Councils/Export Promotion Organizations in India and similar bodies in foreign countries as well as with international organizations working in the field.

Activities of EPCES Providing financial assistance to EOUs/SEZ Units through Market Development Assistance for export promotion activities abroad. Organising Open Houses/Seminars/Workshops in different states of the country for resolving their problems and eliciting suggestions for policy making by Government. Finance, CBEC, CBDT, RBI, State Governments etc. Taking up issues affecting EOUs/SEZ Units with various Ministries like Commerce, Participating in trade fairs/exhibitions in India and abroad. Informing members about latest developments and changes in the national and international trade scenario. Publishing a quarterly EPCES News focusing on marketing strategies, international scene, latest provisions and procedures relating to Export-Import, Customs & Excise, Investment Opportunities etc. Bringing out publications for use within India and abroad. Organizing buyer-seller meets with EOUs and SEZ Units for the promotion of exports.

Export Promotion Schemes I. Duty Exemption and Remission Schemes a) Advance Licence Scheme to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage) with a specific export obligation in terms of value and quantity. b) Export Promotion Capital Goods (EPCG) Scheme to allow import of capital goods thereof as well as computer software systems) at 5% customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under the Scheme to be fulfilled over a period 8 years reckoned from the date of issuance of licence. Relaxation in export obligation has been allowed for specific categories such as Units pertaining to agro, SSI, BIFR etc. c) Duty Free Replenishment Certificate (DFRC) is issued for import of inputs used in the manufacture of goods without payment of basic customs duty after completion of exports. d) Duty Entitlement Passbook (DEPB) Scheme to neutralise the incidence of customs duty on the import content of the export product and the exporter is entitled for for pre-production, production and post-production (including CKD/SKD

a duty credit as a specified percentage of FOB value of exports, made in freely e) Schemes related to Gems & Jewellery sector such as Replenishment Licence, Advance Licence, Diamond Imprest Licence etc. f) Deemed Export Duty Drawback and Terminal Excise Duty Refund Scheme for those transactions in which the goods supplied to specific categories of received either in Indian Rupees or in Free Foreign Exchange. II. beneficiary, do not leave the country and the payment for such supplies is convertible currency.

Special Economic Zone is a specifically delinked duty free enclave and is deemed to be foreign territory for the purposes of Trade Operations and duties and tariffs wherein payment of duty. these units can import/procure from the DTA all types of goods and services without

III.

Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park Scheme or Bio-Technology Park Scheme to operate under duty-free regime for import/procurement of all types of goods including capital goods without payment of duty for manufacture of goods for export.

IV.

Free Trade and Warehousing Zone (FTWZ) Scheme to create trade related carry out trade transaction in free currency.

infrastructure to facilitate the import and export of goods and services with freedom to Served from India Scheme to allow duty free import of capital goods including spares, office equipment and professional equipment, office furniture and consumables related to the main line of business against exports of services. Target plus Scheme for the status certificate holder to allow duty free credit based on equipment, professional equipment and office furniture.

V.

VI.

incremental exports to import any inputs, capital goods including spares, office Vishesh Krishi Upaj Yojana Scheme to allow duty free import of inputs or goods value added products.

VII.

including capital goods (as notified) against export of certain agricultural and their Assistance to States for Infrastructure Development of Exports to encourage the state government to participate in promoting exports from their respective states for developing infrastructure etc.

VIII.

IX.

The Market Access Initiative (MAI) Scheme to provide financial assistance for a whole range of activities as Medium Term Export Promotion efforts with a sharp focus on a country and product.

X.

The Marketing Development Assistance (MDA) Scheme to provide financial assistance for a range of export promotion activities such as participation in trade fairs and buyer seller needs abroad or in India, export promotion seminars etc

XI.

Other schemes to promote activities such as Brand Promotion and Quality Improvement etc.

Special Economic Zone in India

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. In order to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. Currently there are 143 SEZs (as of February 2012) operating throughout India in the following states[2]: Karnataka - 18; Kerala - 6; Chandigarh - 1; Gujarat - 8; Haryana - 3; Maharashtra - 14; Rajasthan - 1; Tamil Nadu - 20; Uttar Pradesh - 4; West Bengal - 2: Orissa - 1.

Objectives of SEZ generation of additional economic activity promotion of exports of goods and services creation of employment opportunities development of infrastructure facilities promotion of investment from domestic and foreign sources

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 chairperson of the Approval Committee.

related issues. Each Zone is headed by a Development Commissioner, who is ex-officio

Facilities and Incentives

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units 100% Income Tax exemption on export income. Exemption from minimum alternate tax under section 115JB of the Income Tax Act. External commercial borrowing by SEZ units up to 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.

Free Trade Zones in Dubai

Free zones (sometimes called a free economic zone, duty free zone, tax free zone, trade free guaranteed for 15 or 50 years. Each free zone has its own specific requirements regarding

zone or free trade zone) in the UAE allow 100% foreign ownership and have no taxes - usually minimum office/warehouse space and permitted activities. Companies outside the free zones require a local sponsor and allow maximum 49% foreign ownership.

Free Zones have been successful in attracting a large number of foreign companies and foreign direct investment. The share of the Free Zones in non-oil exports has increased considerably along with the net exports from the Free Zones. The incentives offered by various Free Zones of the UAE are generally similar and include 100% Foreign Ownership 100% tax exception Quick approval procedures Full repatriation of capital and profits Extended leases Abundant and inexpensive energy Investors can either register a new company in the form of a Free Zone Establishment (FZE)/Free Zone Company (FZCO) or simply establish a branch or representative office of their

existing or parent company based within the UAE or abroad. An FZE is a limited liability establishment, incorporated in a Free Zone, owned by one natural or judicial person, whereas an FZCO is a limited liability company incorporated in a Free Zone by more than one shareholder, generally up to five. FZE/FZCO is governed by the rules and the regulations of the Free Zone in which they are established. There is a minimum capital requirement ranging from AED 50,000 to AED 1,000,000 depending upon the selected Free Zone.

Once a legal presence has been established in the Free Zone, the business will need to lease premises or land and acquire a license from the FZA. Different types of licenses are issued in different Free Zones; however companies with valid licenses only can conduct business within the Free Zone or abroad. To sell their products in the UAE, a UAE registered official agent is required. Services and products can be obtained from and within the UAE without an agent. The licenses issued by the FZA can be renewed annually as long as a lease agreement is in force with the FTZ

The Free Zones help in keeping the engine of economic diversification rolling by attracting foreign investment in the private sector Reduces its economic dependence on oil, while creating employment for its nationals. diversification, but also for changing the very face of economic activity in this region Abu Dhabi Free Zones Abu Dhabi Airport Free Zone (ADAFZ) Higher Corporation for Specialized Economic Zones (HCSEZ) Industrial City of Abu Dhabi (ICAD 1 and 2) Khalifa Port and Industrial Zone (KPIZ) twofour54

the Free Zones could prove to be the mechanism not only for a new impetus to

Dubai Free Zones

Dubai Airport Free Zone (DAFZ) Dubai Car and Automotive City Free Zone Dubai Flower Center Free Zone - at Dubai International Airport. Dubai Gold and Diamond Park Dubai Industrial City (DIC) Dubai Health Care City (DHCC)

Dubai International Financial Centre (DIFC) Dubai Internet City (DIC) Dubai Media City Dubai Multi Commodities Centre (DMCC) Dubai Silicon Oasis Dubai Gold and Commodities Exchange (DGCX) - part of DMCC Dubai Technology and Media Free Zone (TECOM) - includes DIC, DMC, DKV Economic Zones World (EZW) Jebel Ali Free Zone (JAFZ) Dubai Knowledge Village (KV) (DKV)

Dubai Free Zones Under Development Dubai Aid City Dubai Auto Parts City Dubai Biotechnology & Research Park (Dubiotech or Dubai Biotech) Dubai Carpet Free Zone - Deira. Dubai Maritime City Dubai International Arbitration Center (DIAC) Dubai Outsource Zone (DOZ) Dubai Studio City Dubailand Dubai Techno Park (TP) Dubai Textile Village eHosting Data Fort Heavy Equipment & Trucks Free Zone International Media Production Zone Mohammad Bin Rashid Technology Park - Jebel Ali Area

Ajman Free Zones Ajman Free Zone (AFZ)

Fujairah free zones Fujairah Free Zone (FFZ) Fujairah Creative City

Ras Al Khaimah free zones

RAK Free Trade Zone (RAKFTZ or RAK FTZ) RAK Investment Authority Free Zone (RAKIA FZ) Ras Al Khaimah Media Free Zone (RAKMFZ) - RAK Media City

Ras Al Khaimah free zones Under development RAK Education Zone.

RAK Center for Business Excellence or RAK Training Center for Business Excellence. RAK Financial Center. RAK Industrial and Technology Park.

Sharjah Free Zones Hamriyah Free Zone Sharjah Airport International Free Zone (SAIF)

Umm Al Quwain free zones Ahmed Bin Rashid Free Zone (ABRFZ)

Jabel Ali Free Zone (JAFZ) The Jebel Ali Free Zone (JAFZ) was established by decree No. 1 of 1985 and is located in the Emirate of Dubai. It is around the worlds largest man-made port. Jebel Ali was initially seen as Zone is home to approximately over 6000 companies. Features Excellent support service from Dubai Ports Authoritys two modern terminals. On-site consultancies, etc. chamber of commerce, international banks, insurance companies, ideal base for multinationals to warehouse and distribute their products in the Gulf. The Free

Mortgaging of company-owned facilities (excluding leased land) Lease period up to 50 years. Types of activities include manufacturing, processing, assembling, packaging, import/ Export, distribution, storage, services, etc.

Form of registration As a branch of a foreign company - no minimum capital required As a branch of a UAE company - no minimum capital required. As a Free Zone Company (FZCO) - minimum share capital is AED 500,000. As a Free Zone Establishment (FZE) - minimum share capital is AED 1,000,000 Facility costs and type of license

Dubai Car and Automotive City Free Zone DUCAMZ was established with the objective of re-exporting used cars to the Asian and African Region where the demand exists and continues to grow. This zone is situated within the Dubai all airports and seaports in the region. From here the automobiles are reloaded onto feeder linking the neighboring countries to the Middle East and beyond city and comprises of one million square meters of bonded area. The location has easy access to vessels, or on to trucks which travel throughout the region on a modern network of highways,

Features Government support services. Competitive freight charges. Ease of administration problems. No restrictions on import of automobiles. No import duties. Hassle free clearance from Police (traffic department), Customs, Port and Banks. Excellent support systems. The facilities could be leased for 50 years. Type of company activities would include trading in cars only

Form of registration As a branch of a UAE company - no minimum capital required. As a Free Zone Company (FZCO) - minimum share capital is AED 100,000. As a Free Zone Establishment (FZE) - minimum share capital is AED 100,000. Dubai Internet City (TECOM) The Dubai Internet City (DIC) is a part of the Dubai Technology and Media Free Zone. It was formed under Law No. 1 of 2000 of the Emirate of Dubai. The DIC provides a knowledgeeconomy ecosystem that is designed to support the development of Information and built inside a Free Trade Zone Features State-of-the-art technology. World class technical infrastructure (high bandwidth, low telecom cost, high speed support infrastructure etc) built by CISCO, SUNMICROSYSTEM, SIEMENS. Largest commercial internet protocol telephony system in the world. Stringent cyber regulations. Rich network that companies can tap for resources, partnerships and ideas. Easy and fast company registration and licensing procedures. Lease up to 20 years. State-of-the-art urban infrastructure (cost competitive, flexible office space, etc). Communications Technology (ICT) companies. It is the Middle Easts biggest IT infrastructure

Type of company activities include Software Development, Business Services, Web Based and e-Commerce, Consultancy, Education and Training, Sales and Marketing and Back Office Operations, etc

Form of registration

As a branch of a foreign company -no minimum capital required As a branch of a UAE company-no minimum capital required. As a Free Zone Limited Liability Company (FZ-LLC) - Minimum share capital is AED 50,000 and the maximum depends on the authorities after review of the business plan.

Dubai Media City TECOM The City provides an advanced infrastructure and supportive environment for media-related businesses to operate globally out of Dubai. The DMC brings to the media community an advanced infrastructure based upon a global interconnected network, linked by satellites, computers, internet, television, radio, journalism, cinema and film production. The City is Sony Broadcast & Professional, McGraw Hill Publishing, Bertelsmann, and MBC, along with regional companies and new start-ups. Features The most advanced scalable IT network. Satellite Uplink / Downlink facilities. Shared Business Centers. Post production studios and facilities. Customer Care Center (provides all technical and support service). Special facilities for professional freelancers. 50 year lease contract for land and building. Type of company activities includes broadcast services, music, video/audio publishing, production and post-production, advertising agencies, studios, etc. Form of registration As a branch of a foreign company - no minimum capital required. As a branch of a UAE company - no minimum capital required. As a Free Zone Limited Liability Company (FZ LLC) - Minimum share capital is AED 50,000 and the maximum depends on the authorities after review of the business plan. already home to many international companies including global giants such as CNN, Reuters,

Dubai Studio City Dubai Studio City (DCS) is a Free Zone dedicated to facilitate the creation and development of an environment and world-class infrastructure to foster the growth of the television, film and music industries in the region. It will also have residential areas, hotels, an entertainment centre, film schools and training institutes. Features Industry Cluster Environment Advanced and scalable Telecoms and Broadband Networking Opportunities Tap into the creative and innovative energy in the zone for new ideas Excellent networking opportunities in the Media Hub Commercial, residential, educational and recreational facilities Type of company activities include TV and radio broadcasting, broadcast management, filmed entertainment, film production / post production, sound production, various production services, music & entertainment etc. Form of registration As a branch of a foreign company - no minimum capital required. As a branch of a UAE company - no minimum capital required. 50,000 AED 2,500,000 depending on the type of license. Dubai Knowledge Village This new education and training hub is also set up to complement the Free Zones other two clusters: Dubai Internet City as IT hub and Dubai Media City as Media hub Features Government support services. Conference centers. Dormitory. Multimedia library and other common facilities. The facilities could be leased for 50 years. As a Free Zone Limited Liability Company (FZ-LLC) - minimum share capital AED

Type of company activities include IT and Media Corporate Schools, Executive Education Centre, HR Development Centre, Professional Training Centers, Vocational Training Centers, Assessment Centre, Testing Centre, Linguistic Institute, Innovation Centre, Academic Service Provider, School, e-Learning Provider, etc.

Form of registration As a branch of a foreign company - no minimum capital required. As a branch of a UAE company - no minimum capital required. As a Free Zone Limited Liability Company (FZ-LLC) - minimum share capital varies from AED 50,000 AED 2,500,000 depending on the type of license Dubai International Academic City DIAC is the Worlds only Free Zone dedicated to international higher education. Located in Dubai Academic City, DIAC will serve as the regional base for premier international higher education institutions. Spread across an area of 25 million square feet, the DIAC campus provides an intellectually inspiring environment for students and faculty. DIAC will only house area international universities separating them from other public colleges and institutions in the Benefits for DIAC investors include 100% foreign ownership, 100% tax free, 100% repatriation of profits. There are currently many international universities of higher learning from diverse of DIAC; however the authority expects to further house 25 international universities to cater to more than 30,000 students in the future. These institutions offer programs that range in duration from one year to four years. Major academic programs on offer include engineering, computer science, fashion and design, biotechnology, environmental studies, quality management and business management programs. Features Government support services. gaming centres etc. Student Accommodation Wellness centres, dining facilities and entertainment venues including movie theatres, regions including Australia, India, Pakistan, Iran, Russia, Belgium, UK and Ireland operating out

Sports centre Type of company activities include Universities, colleges, sports facility management, library management, accommodation service provider, academic support services, etc. Multimedia library and other common facilities.

Form of registration As a branch of a foreign company - no minimum capital required As a branch of a UAE company - no minimum capital required. As a Free Zone Limited Liability Company (FZ-LLC) - minimum share capital varies and depends on the authorities after review of the business plan. Dubai Flower City Strategically located within the boundaries of Dubai International Airport, Dubai Flower Centre (DFC) is a new hub of growth for the floriculture industry in the 21st century. Features

World class logistics hub. Increased capacity and connections to and from major global trading points. Provides cost effective, high quality point of import and distribution. Range of innovative technology. The worlds best cool chain management. Resources and facilities to enable cost effective value addition. Facilities and support to enable efficient commercial transactions. Rapid consolidation and trans-shipment facilities. Specialised perishables handling team. Flower treatment facilities. Type of company activities would include import consolidation, re-export, wholesale/trading, grower, other value added services, technical service providers, repackaging, bouquet making/bunching/assembling and logistics service providers.

Form of registration As a branch of a foreign company - no minimum capital required As a branch of a UAE company - no minimum capital required As a Free Zone Company (FZCO) - minimum share capital is AED 500,000. As a Free Zone Establishment (FZE) - minimum share capital is AED 1,000,000

Dubai Airport Free Zone It is wholly owned by the Government of Dubai. DAFZA is the only airport-oriented Free Zone in Dubai, and its located within the boundary of Dubai International Airport. DAFZA is an ideal location for high-tech/IT products, luxury items, jewellery, light industry and activities related to the aviation industry Features Located within the boundaries of Dubai International Airport. Fast and efficient cargo clearance services (8-24 hours). Online customer service (e-Services). Land with easy access to airport apron. Type of activities include manufacturing, processing, assembling, packaging, import / export, distribution, storage, services, etc. Form of registration As a branch of a foreign company - no minimum capital required. As a branch of a UAE company - no minimum capital required. As a Free Zone Company (FZC) - minimum share capital is AED 500,000. Free Zone Establishment (FZE) - minimum share capital is AED 1,000,000. International Freight Forwarders and Logistics companies at DAFZ.