Sez Faq

Updated FAQs-SEZ Manual
Frequently Asked Questions
1.
Whether Service Tax is leviable on services provided in non-processing area? Whether service Tax exemption available to a Developer if services are rendered before SEZ is notified? What procedures are to be followed by Contractor/Sub-contractor for availing the benefits/exemptions available to Developer/CoDeveloper? Is there any benefit available to a Sub-Contractor as in case of a Contractor of a SEZ Developer? SEZ rules requires minimum lease period of 5years for leased land. What happens in the 6th year in case the tenure of lease is not extended?
2.
3.
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5.
6.
Is there any mechanism prescribed for exit of Developer from the SEZ?
7.
What are the Penal consequences for a Developer? Whether part shipment of the imported goods is possible?
If goods are procured on lease (Finance or operating lease) from domestic or foreign leasing company, what procedure and additional documents are required to be submitted?
8.
9.
10.When goods are imported through Custom House Agent(CHA), what additional procedure and documents required to be produced by SEZ developer/Co-developer/Contractor for delivery of imported goods at SEZ site from port? 11.Would the procedure remain same when goods are imported on FOB (Free on Board) or CIF (Cost, Insurance and freight) basis? 12.Is the unit under SEZ required to pay lease amount in convertible foreign currency to Developer so that tax holiday benefit under income Tax Act could be availed?
13. Can the Bond cum Legal Undertaking (LUT) once filed can be amended or whether additional Bond cum LUT can be submitted in case when there is further requirement to procure goods (including capital goods) from domestic market or by import apart from list of goods provided earlier for the purpose to ascertain bond value?
14.
Is developer/co-developer required to file application for appointment of authorized officer, specified officer, approval committee or SEZ authority?
15. Is Developer/Co-developer required to pay cess on payments made in relation to import of technology for which payments made in the form of royalty or other mode?
16.
When BOA approves authorized operations other than Default AO; is it required to intimate the same to Development Commissioner or detailed application with other detail is to be made?
If the SEZ authority is not appointed, who would performs the function of the same and to whom SEZ developer file the application in relation to operation and other activities? When developer and co-developer required to file quarterly and Half yearly progress report (QPR & HPR) to concerned authorities? If Developer/Co-developers fails to start construction activity after receipt of LOA, what consequence would be there?
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20.
SEZ developer/Co-developers have been provided exemption from central and state levies, whether is there any requirement to receive the exemption letter from concerned authorities?
Is Developer/Co-developers required to comply with achievement of Net foreign exchange cumulatively for a period of five years? Whether SEZ Developer/Co-developer have exemption from payment of royalty/seignorage fees to state government for excavation works? Whether SEZ Developer/Co-developer would be liable to pay service tax as service recipient on services received from Goods Transport Agency
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25. Under APVAT, Developer/Co-developer do not have benefits of exemption from payment of VAT and therefore liable to pay VAT on local procurement of goods. Whether Developer/Co-developer could claim of refund of the same as the same would be utilized for authorized operations of SEZ? 26. If Developer/Co-developer appoints contractor/contractors to perform authorized operations, whether any approval is required from BOA or DC? 27. As service tax exemption has been provided to Developer/Co-developer, whether the benefit is available for all the
To avail benefit of excise duty exemption, from whom excisable goods need to be procured by SEZ Developer/Co-developer? 29. As SEZ Developer/Co-developer only have benefit of exemption under CST and not under APVAT, whether SEZ Developer/Codeveloper could advice supplier situated in AP to supply goods from outside the state and not from within the AP? 30. If contractor is appointed by Developer/Co-developer, then under which name purchase order and invoice need to be issued so that benefit of
28.
1.
Whether Service Tax is leviable on services provided in non-processing area?

Exemption from service tax on taxable services provided to Developer to carry out authorized operations; Hence, a view can be taken that any services provided even in non-processing area in relation to authorized operations of a Developer would be exempt; However, it has been provided that infrastructure for business or social purposes in the nonprocessing area, as may be approved by Board, shall be eligible for exemptions, concessions and drawback; Therefore, it appears that Developer may not be
2.
Whether service Tax exemption available to a Developer if services are rendered before SEZ is notified?
No, it is necessary that services are rendered and payment for taxable services is made after notification of SEZ; Where services have been partially rendered before notification of SEZ, fee payable for such services rendered during pre-notification period would attract service tax even though service fee is paid post notification of SEZ.
3.
Is there any benefit available to a Sub-Contractor as in case of a Contractor of a SEZ Developer?

No specific exemption granted as per SEZ Act, 2005 and SEZ Rules,2006 to a subcontractor appointed by a contractor; However, since the SEZ law & procedures are still evolving, benefit to subcontractor may be explored; This issue has been discussed with the relevant authorities and clarity on the same is still awaited.
4.
What procedures are to be followed by Contractor/Sub-contractor for availing the benefits/exemptions available to Developer/CoDeveloper?
Customs Duty/Excise tax exemptions Goods imported/locally procured to clearly state that goods are procured for Developer (mention address and SEZ No); Provide list of material required to be imported/procured locally, duly certified by Chartered Engineer; Developer/Co-Developer to obtain approval from DC for procurement of said listed material;
Contractor/Sub-contractor to maintain inventory, provide information on periodical basis or as and when requisitioned by any authority; Contractor/sub-contractor to issue reports for purchase consumption, balance stock etc In addition, contractor/sub-contractor to comply with the following steps/procedures: File BOE in quadruplicate (specially stamped as SEZ CARGO") with specified Officer for assessment. Thereafter, submit assessed BOE to Customs officer at the place of import; Submit 5th copy of BOE, bearing endorsement of Specified Officer' with customs officer within 30 days from date of clearance of goods;
Clear goods procured under claim of export benefits on the basis of Form ARE-1 and BOE filed by Supplier; Forward copy of Form ARE-1 and BOE, along with endorsement from specified officer, to central Excise officer having jurisdiction over the supplier within 30 days.
5.
SEZ rules requires minimum lease period of 5years for leased land. What happens in the 6th year in case the tenure of lease is not extended?
No specific guidelines provided in the SEZ Act, 2005 and SEZ Rules,2006 In case lease tenure is not extended, the alternative option could be: --government acquires the land and then grants extension to the Developer; or --Developer exits and seeks closure of SEZ
6.
Is there any mechanism prescribed for exit of Developer from the SEZ?
No specific guidelines laid down for exit of a Developer;
It appears that guidelines for exit of units to the extent relevant may apply to the Developer;
Transfer of LOA issued to Developer by the government under following circumstances:
---inability to discharge the functions or perform the duties imposed on him by or under SEZ
---on persistent default in complying with any directions given by the BOA: ---violation of the terms and conditions of the LOA; or ---inability to discharge the duties and obligations of a Developer due to financial hardships.
7. What are the penal consequences for a Developer?
Government has the powers to transfer or cancel the LOA under specified circumstances as laid down in section 10 of SEZ Act,2005; Customs duty and refund of other benefits like drawback may be demanded from Developer in case: -goods are not used for authorized operations; or -Developer fails to account for goods in the manner specified in the SEZ Act, 2005 or SEZ Rules,2006.
8.
Whether part shipment of the imported goods is possible?

Yes, part shipment of the imported goods is possible and is to be performed in same way as in case of imports made by assessee other than SEZ.
In less than container cargo, verification of goods can be performed by authorized officer at SEZ gate of entry or after entry of the same into the premises of SEZ.
9.If goods are procured on lease (Finance or operating lease) from domestic or foreign leasing company, what procedure and additional documents are required to be submitted?
Under the SEZ law, the procedure for import or domestic procurement of goods is prescribed and the same is applicable irrespective of whether the goods (including capital goods) have been purchased on lease (finance or operating)/loan/free of cost basis In relation to the import or domestic procurement of goods (including capital goods) on finance/operating lease by Developer/CoDeveloper, there is requirement to file all the
10. When goods are imported through Custom House Agent(CHA), what additional procedure and documents required to be produced by SEZ developer/Co-developer/Contractor for delivery of imported goods at SEZ site from port?
CHA are the license holder who are authorized to provide services in relation to the entry or departure of conveyances or the import or export of goods at any customs station. In other words, CHA are authorized person to enter into customs area. The procedure is common whether the goods are imported by importer solely on his own account or by taking the assistance of CHA. No additional documents or procedure is required to be followed, when goods are delivered at SEZ site from port except copy of Bill Of Entry, Invoice packing list
11.Would the procedure remain same when goods are imported on FOB (Free on Board) or CIF (Cost, Insurance and freight) basis?
Yes, the procedure for the import of goods would remain same whether the goods are imported on FOB or CIF basis. The goods can be imported either on basis of CIF basis by importer. The customs duty is levied on the value of the goods determined on CIF basis. If the goods are imported on FOB basis, the valuation of the goods is done on the basis of Customs Valuation (Determination of Price of imported Goods)Rules,2007 applicable w.e.f
12.Is the unit under SEZ required to pay lease amount in convertible foreign currency to Developer so that tax holiday benefit under income Tax Act could be availed?
No, there is no such requirement under Income Tax Act that benefit of tax holiday would be available to Developer only if the unit pays lease rental in convertible foreign currency.
13.Can the Bond cum Legal Undertaking (LUT) once filed can be amended or whether additional Bond cum LUT can be submitted in case when there is further requirement to procure goods (including capital goods) from domestic market or by import apart from list of goods provided earlier for the purpose to ascertain bond value?
No, Bond cum LUT once filed cannot be amended. Only remedy is to file additional or
14.Is developer/co-developer required to file application for appointment of authorized officer, specified officer, approval committee or SEZ authority?
For the appointment of specified officer Authorized officer, the developer/co-developer is required to file application to the jurisdictional commissioner of customs & Excise along with the copy of notification issued by BOA. Further, there is no such requirement to file application by developer/Co-developer for the appointment of Approval Committee and SEZ authority'. While, the request can be made to BOA
15.Is Developer/Co-developer required to pay cess on payments made in relation to import of technology for which payments made in the form of royalty or other mode?
Under Research and Development Cess Act, 1986(R&D cess Act) and Research and Development cess Rules,1996 (R&D cess Act)cess at the rate of 5% is imposed on all payments made towards the import of technology, the cost of drawings and designs, or payments made to foreign collaborators or to any other person for or in connection with deputation of technical personnel to India in terms of any foreign collaboration agreement. The R&D cess Act is enlisted in the First Schedule of the SEZ Act,2005 and therefore SEZ developer/co-developer would be exempt from payment of cess under said Act
16.
When BOA approves authorized operations other than Default AO; is it required to intimate the same to Development Commissioner or detailed application with other detail is to be made?
As per instruction by BOA issued on June 26,2007 by which approval is required only for operations other than Default authorized operations (DFO). Subsequent to approval by BOA, intimation for commencement of DFO is to be made to DC with detailed list quantifying goods, services and capital goods including machinery, equipments and construction materials required for the authorized operations,
17.
If the SEZ authority is not appointed, who would performs the function of the same and to whom SEZ developer file the application in relation to operation and other activities? SEZ authority is appointed for each SEZ (i.e. Indu authority) by Central government to undertake measures for the development, operation or maintenance of the SEZ Until such Authority is constituted, the Development Commissioner exercising control over such existing Special Economic Zones shall continue to exercise such control over the Special Economic Zones.
18.
When developer and co-developer required to file quarterly and Half yearly progress report (QPR & HPR) to concerned authorities?
After filing of Bond cum LUT and receipt of approval from BOA for other than DFO, the Developer and Co-developer shall submit QPR and HPR on import and procurement of goods from the Domestic Tariff Area, utilization of the same and the stock in hand, in Form E prescribed to the DC and the specified officer jointly and the DC shall place the same before the Approval Committee. The filing of QPR and HPR helps to track authorities that if any shortfall of value of original bond cum LUT is there,it may instructs developer/co-developer to file a fresh or
19. If
Developer/Co-developers fails to start construction activity after receipt of LOA, what consequence would be there?
After receipt of LOA, the developer/codeveloper is required to implement the construction activity in SEZ within a period of three years or within five years if extension is provided by BOA for further two years. If they fails to implement the project within period specified, the BOA may suspend the LOA till one year or may
20. SEZ
developer/Co-developers have been provided exemption from central and state levies, whether is there any requirement to receive the exemption letter from concerned authorities?
SEZ developer/co-developer have benefit of exemption from central and state levies under SEZ law but they would have to file application to DC to receive exemption letter from each and every concerned authorities whether at Central Or state level so that they can proceed to
21.
Is Developer/Co-developers required to comply with achievement of Net foreign exchange cumulatively for a period of five years?
No, there is no such requirement for developer and co-developer to achieve NFE during relevant period. The benefit under SEZ law to developer and Co-developer is provided so that infrastructure facilities can be developed at fast pace and can promote other entrepreneurs establishing units under SEZ to earn foreign exchange for the country.
22. Whether
SEZ Developer/Codeveloper have exemption from payment of royalty/seignorage fees to state government for excavation works?
No, there is no specific exemption has been provided to SEZ developer/codeveloper from the payment of royalty/seigniorge fees on excavation works under SEZ Act,2005.Further, the Andhra Pradesh Mines and Mineral Concession Rules 1966 (APMMC Rules) and in APSEZ policy, does not provide for
23. Whether
SEZ Developer/Codeveloper would be liable to pay service tax as service recipient on services received from Goods Transport Agency (GTA) for transportation of goods?
Under service tax law, liability of payment of service tax on services provided by Goods Transport Agency (GTA) is on service receiver. For SEZ developer/co-developer by a notification, all the services consumed within SEZ are exempted from payment of service tax. Since, GTA services would be utilized for the purpose of delivery of goods in SEZ,
24.
If services has been imported by SEZ Developer/Co-developer, whether liability to pay service tax would fall on Developer/co-developer under reverse charge method?
No. Under service tax law, liability of payment of service tax on services imported from outside India is on service receiver situated in India under reverse charge on satisfying the conditions prescribed under Taxation of Services (Provided from outside India and received in India)Rules,2006.By a notification, all the services consumed with SEZ are exempted from payment of service tax. As services imported would be utilized and consumed within SEZ, the
25.Under APVAT, Developer/Co-developer do not have benefits of exemption from payment of VAT and therefore liable to pay VAT on local procurement of goods. Whether Developer/Co-developer could claim of refund of the same as the same would be utilized for authorized operations of SEZ? SEZ developer/co-developer is required to take registration under APVAT as they would procure the goods in the course of inter state transactions, import from outside India or purchase of goods within the state. Liability of APVAT on local procurement would arise as exemption is available only for units of SEZ. Input tax credit (ITC) can be claimed on goods locally procured apart from goods mentioned under Negative list. As no sale would be performed by developer/co-developer, refund
26.If Developer/Co-developer appoints contractor/contractors to perform authorized operations, whether any approval is required from BOA or DC?
No, there is no such requirement to get approval from BOA or DC to appoint contractor/contractors. While, for getting clearance of goods procured or imported, an intimation should be filed to DC regarding appointment of contractor with an copy of Memorandum of understanding.
27.As service tax exemption has been provided to Developer/Co-developer, whether the benefit is available for all the services provided for the purpose of authorized operations?
No, benefit of exemption from service tax is not available for all the service provided to SEZ developer/co-developer. The service tax exemption notification is specific to the services consumed within SEZ. Further, based on various judicial precedents, the notifications have to be construed strictly as the same are intended to confer benefits to an assessee. In light of the above, the words used in the notification have to be given its true meaning and accordingly the benefits at present
28. To
avail benefit of excise duty exemption, from whom excisable goods need to be procured by SEZ Developer/Co-developer?
Under Central Excise Act,1994, the liability for payment of excise duty is on manufacturer for manufacturing goods at the time of removal of goods. Thus, for availing the exemption from payment of excise duty by developer/co-
29.
As SEZ Developer/Co-developer only have benefit of exemption under CST and not under APVAT, whether SEZ Developer/Co-developer could advice supplier situated in AP to supply goods from outside the state and not from within the AP?
It is practical issue. Developer/co-developer can request supplier to deliver goods from their depots situated outside the AP to SEZ area instead from depots/factory situated within AP. It can be possible if developer/co-developer issue purchase order in the name of depots situated outside AP and the factory/depot of supplier situated within AP can make stock transfer on declaration in Form F to depots situated outside AP. Then the developer/co-developer could procure goods by giving declaration in Form l to factory/depots situated outside AP without
30. If
contractor is appointed by Developer/Co-developer, then under which name purchase order and invoice need to be issued so that benefit of exemption can be availed?
Contractor appointed by developer/codeveloper can procure goods without payment of duty only when all documents are issued in joint name of Developer and Contractor. As contractor would procure goods, PO and invoice issued by supplier would be in the name of contractor only with mentioning name and address of SEZ

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Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

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Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Whether Service Tax is leviable on services provided in non-processing area?

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Is there any benefit available to a Sub-Contractor as in case of a Contractor of a SEZ Developer?

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

7. What are the penal consequences for a Developer?

Frequently Asked Questions

Updated FAQs-SEZ Manual

Whether part shipment of the imported goods is possible?

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions

Updated FAQs-SEZ Manual

Frequently Asked Questions