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By:SHIV RAJMBA-MIET

ROLE OF SPECIAL ECONOMIC ZONE

IN STRATEGIC PLANNNIG FORBUSINESS UNIT ESTABLISHMENT


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INTRODUCTION

Special Economic Zone (SEZ) is defined as "aspecifically delineated duty free enclave andshall be deemed to be foreign territory for the

purposes of trade operations and duties andtariffs".

Special Economic Zone is one or more areas ofa country where the tariffs and quotas areeliminated and bureaucratic requirements arelowered so that more companies are attracted tothe area. The companies establishing in thearea also get extra incentives for doing business


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Incentives and facilities offered to

the SEZs

The incentives and facilities offered to the units in SEZs forattracting investments into the SEZs, including foreigninvestment include:-

Duty free import/domestic procurement of goods fordevelopment, operation and maintenance of SEZ units

100% Income Tax exemption on export income for SEZunits under Section 10AA of the Income Tax Act for first 5

years, 50% for next 5 years thereafter and 50% of theploughed back export profit for next 5 years.

Exemption from minimum alternate tax .

External commercial borrowing by SEZ units upto US $500 million in a year without any maturity restriction


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OBJECTIVES

To set up business unit in SEZ

To know the procedure setting up business accordingto govt. guidelines

To know the incentives and benefit getting from sez


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Positive Impacts

To Nation

World class business environment

Increased FDI

Higher economic growth

Infrastructural development

Export growth

Employment Opportunities

Exposure to technology and global markets


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Positive Impacts

TO Business houses

Hassle free operating environment

Single window clearance

Simplified procedure for setting up business.Duty free import

Tax exemption- VAT, CST, ST, other levies

External commercial borrowings

100% profit repatriation from export earnings


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Positive Impacts

To People

Employement opportunities

Impact on lifestyle and standard of living

Business infrastructure combined with social facilitiesBetter work culture , good education, leadership vision


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SEZ Policy

Single window approval by DC

No License SEZ Policy required to manufacture itemsreserved for SSI sector.

100% FDI allow SEZ Policy with in manufacturingthrough automatic route except in a few sectors.

No license required for import

Manufacturing, trading and services allowed.


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SEZ Policy

Guidelines issued by RBI in Nov 2002 for setting upOff-shore Banking Units in SEZs.

External commercial borrowings by units allowed

without any maturity restrictions.Freedom to bring in export proceeds without any time

limit

100% of export proceeds in EEFC account

Freedom to make overseas investment from it


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SEZ Policy

Commodity hedging permitted

Foreign companies permitted to set up branches formanufacturing activities

Exemption from interest rate surcharge on exportfinance

SEZ allowed to write off unrealised export bills


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Type of sez

Sector Specific SEZ-units may be set up for

manufacture of one or more goods in a sector

rendering of one or more services in a sector

Multi-product SEZ-units may be set up for

manufacture of two or more goods in a sector orgoods falling in two or more sectors

trading and warehousing

rendering of two or more services in a sector orservices falling in two or more sectors


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SEZ in a port or airport means a SEZ in an existing portor airport for manufacture of goods in two or moresector or goods falling in two or more sectors or fortrading and warehousing or rendering of services


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Functional SEZs at present

At present there are eight functional SEZslocated at:

Santa Cruz (Maharashtra),

Cochin (Kerala),

Kandla and Surat (Gujarat),

Chennai (Tamil Nadu),

Visakhapatnam (Andhra Pradesh),

Falta (West Bengal) &

Nodia (Uttar Pradesh).


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Processing and non-processing areas:

The areas falling within the Special Economic Zones may be demarcated by theCentral Government or any authority specified by it as-

(a) the processing area for setting up Units for activities, being the manufactureof goods, or rendering services; or

(b) the area exclusively for trading or warehousing purposes;

(c) the non-processing areas for activities other than those specified underclause (a) or clause (b) b). [no vacant land in the non-processing area shall beleased for business and socialpurposes such as educational institutions, hospitals,hotels, recreation and entertainment facilities, residential and business complexes,to any person except a co-developer approved by the board

The processing area and Free Trade and Warehousing Zone shall be fully secured byboundary wall with specified entry and exit points. Rule 11(2) of SEZ Rules ,2006)


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Definitions in Special Economic ZonesAct,2005

1) "Unit" means a Unit set up by an entrepreneur in aSpecial Economic Zone and includes an existing Unit,an Offshore Banking Unit and a Unit in an InternationalFinancial Services Centre.

2) Offshore Banking Unit means a branch of a banklocated in a Special Economic Zone


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Definitions

3) International Financial Services Centre means anInternational Financial Services Centre which has beenapproved by the Central Government under sub-section(1) of section 18 (Section 2(q) of Special Economic

Zones Act ,2005)4) entrepreneur means a person who has been granted

a letter of approval by the Development Commissionerunder sub-section (9) of section 15 (Section 2(j) of

Special Economic Zones Act ,2005)5) existing Unit means every Unit which has been set

up on or before the commencement of this Act (Section2(l) of Special Economic Zones Act ,2005)


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Procedure to set up an SEZ Unit

To set up an SEZ Unit, copies of project proposal arerequired to be submitted to the DevelopmentCommissioner who will forward the proposal to the

Approval Committee

A consolidated application form is required to besubmitted for the following approvals:

Allotment of Land / Industrial Sheds in SEZ

Registration-cum-Membership certificate

Annual permission for sub-contracting

Allotment of Import Exporter Code Number

Power connection


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Small Scale Industries registration

Registration with the Central Insecticides Board

Registration with Central Pollution Control Board

Building approval

Sales Tax registration

Approval from the Inspectorate of Factories

Pollution control clearance wherever required


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After submitting the application form and ifevery thing is in order, Letter of Permission(LOP) is issued by the Zone Administration

within 2 weeks after interview of the promoterby the Approval Committee.

Check list for the proposals to be takenup by BOA

Name of the Developer.

Proposed area of the location of the SEZ.

Status of recommendation of the proposal by the StateGovernment .


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Is it a multi-product SEZ?

If it is a sector specific SEZ, the sector is.

Whether it meets the area requirements.

Area of the SEZ (in hectares)

Extent of FDI

Source of FDI

Projected exports from the project.

Projected employment from the project.

Share capital and Reserves of the Developer Company.

Source of funds for the project.


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The Letter of Permission is valid for a period of threeyears with in which the prospective investor isrequired to commence production.

After accepting lOP the unit should issue a letteraccepting terms & conditions of the LOP on its letterpad.

A legal undertaking (LUT) in the prescribed form

undertaking to abide by the terms and conditions ofthe LOP has to be executed by the unit


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Green Card will be issued to the unit by the ZoneAdministration after execution of the LUT. This willhelp the unit to clear the import consignment from

various Ports, etc.

If the unit does not have an Import Export Code(IEC), it will apply in the prescribed form (AayaatNiryaat Form) to the Zone Administration for

the same.After obtaining LOP, the unit has to approach

Customs for obtaining the facilities of duty free importand excise - duty free procurement of indigenous

goods of the raw material and capital goods required


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After the approval from the DevelopmentCommissioner concerned, the manufacturing andother activities have to be undertaken under customs

bond for which formal application is to be made to the

jurisdictional Assistant Commissioner / CentralExcise for issuance of a Private Custom Bonded

Warehouse Licence


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In last central Excise grant Registration Certificatebearing 15 digit PAN based Registration Number . TheNumber would be automatically generated and sent

back to the Development Commissioner for handing

over to the concerned unit.


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THANK YOU

QUESTIONS

SUGGESTIONS

COMMENTS

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