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Special Economic Zone (SEZ)

Presented To:
Mr. Surendra Singh Rajpurohit Presented By: Jupitara Hazarika

Mamta Rajpurohit
Neha Garg Preeti Vyas Priyanka Sharma Shilpa Rathore

Introduction
According to EXIM Policy 2000:
Specifically delineated duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations, duties and tariffs

Cont
A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws

SEZ Scheme
Incorporated in EXIM Policy on April 1, 2000 To provide an internationally competitive & hassle free environment for exports

Quality infrastructure & attractive fiscal


package to attract investors

Units in the Zone have to be a net foreign


exchange earner in 3 years

Cont...
Units may be set up in SEZ for

manufacturing of goods and/or rendering of


Services All import/export operation of SEZ units to be on self-certification basis Sales in the Domestic Tariff Area (DTA) by

SEZ units shall be subject to payment of full


custom duty and import policy in force

Objectives
To promote exports of goods and services To earn foreign exchange To generate employment opportunities To transfer foreign technology To promote investment from domestic and foreign source To develop infrastructure facilities To contribute in the overall development of economy

Incentives and facilities offered to the SEZs


Duty free import/domestic procurement of goods 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

Cont
External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction Exemption from Central and State Sales Tax Exemption from Service Tax Single window clearance for Central and State level approvals

SEZ ACT 2005


To develop confidence in investors and signal the Government's commitment, SEZ policy was established To generate greater economic activity and employment To provide assistance for setting SEZ's in the public, private, joint sector or by State Governments

Cont
SEZ could be set up for manufacture of goods for rendering services for both manufacturing of goods and for rendering services Warehousing Zone

SEZ Framework
Performance of the units to be monitored by a Committee Simplified certification headed by Development Commissioner and consisting of Customs compliance procedures and

documentation with an emphasis on self

SEZ Framework
Exemption from interest rate surcharge on import finance SEZ unit to be positive net foreign net exchange earner within three years No License required for import

SEZ Framework
No separate documentation required for Customs

and Exim Policy


Supplies from DTA to SEZ units treated as

deemed exports
Support service like banking, post office,

clearing agents etc. provided in Zone Complex

SEZ Framework
Investment made by individuals etc in a SEZ company also eligible for exemption u/s 88 of IT Act

Generation, transmission and distribution of power in SEZs allowed


Entry of persons to processing area of the SEZ shall be regulated by the Development Commissioner through issue of identity cards

SEZ Framework
100% foreign direct investment (FDI) is freely allowed in manufacturing sector in SEZ units SEZs permitted to have non-pollution industries and recreational facilities like golf courses hotels and non-pollution service industries

SEZ Framework
Setting up of Off-Shore Banking Units allowed in SEZs OBUs entitled for 100% Income-Tax exemption for 3 years & 50% for next 2 years Enhanced limit of Rs. 2.4 cr per annum allowed for managerial remuneration Exemption from requirement of domicile in India for 12 months prior to appointment as Director

Exports from functioning SEZs


Year
2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Value (Rs. Crore)


13,854 18,314 22 840 34,615 66,638

Growth Rate ( over previous year )


39% 32% 25% 52% 92%

Current investment and Employment (March - 2008)


Investment: Employment: Rs. 83450 Crore 1,13,426 persons

Procedure For Establishing SEZ


Identify the Area and make a Proposal for setting up a Special Economic Zone.

Proposal directly to the BoA requires prior recommendation of the State Govt.

State Govt. to forward the proposal to the BoA, with recommendations, within 45 days

BoA decides on the Proposal subject to the requirements prescribed by the Central Govt.

Proposal Approved

Proposal Approved with Modifications


Modifications acceptable to Developer

Proposal Rejected

Modifications not acceptable to Developer Proposal Rejected

Proposal Approved

Central Govt. grants Letter of Approval (30 days)

Letter of approval received by developer


Application to the Central Govt. for Declaration of identified area as SEZ Notification for Declaration of an area as SEZ Grant of Approval for Authorized Operations Processing and Non-processing Area Sec. 6

Processing & Non-processing Areas


The areas falling within the Special Economic Zones may be demarcated by the Central Government or any authority specified by it as(a) the processing area for setting up Units for activities, being the manufacture of goods, or rendering services; or (b) the area exclusively for trading or warehousing purposes; or (c) the non-processing areas for activities other than those specified under clause (a) or clause (b)
Source: Section 6 of SEZ Act, 2005 and Rule 11, sub Rule (10) of SEZ Rules, 2006]

Development Commissioner (Role)


Each Zone is headed by one DC DC is the head of Approval Committee The DC of the SEZ is responsible for demarcating processing / non processing areas DC grant all local and state level clearances, etc. delegated by the Central / State Government. DC is responsible for communicating reasons for the rejection to the concerned person Monitor the operations of SEZ and help in problem resolution

Applicability of Domestic Laws


Though several laws have been relaxed for the SEZs to promote exports, the area would still have to adhere to the following laws: Local labor laws Local building bye laws if not specially laid out for SEZ Pollution Laws Factory Act

Problem in SEZ
Transparency in policy formulation Payment problem Problem in land acquisition
Minimum size of multi-product SEZ, not to be less than 1000 hectares

Prime agriculture land

Bibliography
www.sezindia.nic.in www.exportindia.nic www.exportimport.com www.taxindiaonline.com

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