SEZ: Special Economic Zone (SEZ) is a geographical region that has economic laws different from a countrys generally applicable economic laws, with the underlying objective being an increase in economic growth and activity through increased foreign investment.
Globally, establishment of SEZs have revolved around achieving the following basic objectives:
Q Economic growth and development - through exports and backward integration
Q Foreign Investment
Q Infrastructure development
Q Employment generation
Q Up-gradation of managerial and technical skills
Achievement of the above objectives through SEZs is typically facilitated through the following -
Q Income tax Holidays
Q Hassle Free Environment
Q Exemption from Indirect duties and taxes
Q No currency restrictions
Q Relaxed foreign investment norms
Q Excellent infrastructure facilities
| ||Period ||Amount
|Income Tax Holiday (Units In Sez)
||For first five years
||100% of the eligible profits or gains
|Next five years
||50% of the eligible profits or gains
|Next five years
||50% of the eligible profits or gains subject to creation or specified reserve
|Income Tax Holiday (Developer) ||Deduction of 100% of profits derived from developing a SEZ for a Period of 10 consecutive assessment years out of the first 15 years from the year in which the SEZ is notified by the Central Government
|Capital Gain ||Exemption from capital gains or transfer or specified assets in Consequence to shifting of industrial undertaking from urban or other areas to SEZ subject to certain conditions.
|Dividend Distribution Tax ||Taxable finance Act 2011
|Minimum Alternate Tax ||Taxable finance Act 2011
|Customs Duties ||Exemption from customs duties for development of SEZ for authorized operation approved by BOA
|Service Tax ||Exemption from Service Tax under chapter VI of the Finance Act 1994 on taxable services provided to a developer or unit to carry on authorized Operation in an SEZ
|Securities Transaction Tax ||Exemption from the Securities Transaction Tax leviable under Section 98 of the Finance (No.2) Act 2004 in case the taxable securities transactions are entered into by a non-resident through the International Finance Service.
|Import Duty ||Duty free Import domestic procurement of goods for development, Operation & maintenance of SEZ units.
|Excise Duty ||Exemption from any duty or excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorized operations by the Developer or entrepreneur.
|Central Sales Tax/VAT ||Exemption from Central Sales Tax/VAT on sale or purchase or goods
Who can set up an SEZ
Approval Procedure For SEZ
Type of SEZ
|Free trading & warehousing zones ||Sez for multi-product2(za) of sez rules, 2006 ||Sez for sector specific 2(zb) of sez rules, 2006 ||Sez in a port or airport 2(zc) of sez rules,2006
|Free trading and warehousing is a special category sez with a focus on trading and warehousing. The objective of such zone is to create trade related infrastructure to facilitate import and export and import of goods and services with freedom to carry out trade transactions in free currency.
In a stand alone Free Trading and Warehousing Zone at least 50% of the area shall be earmarked for developing processing area , free trading and warehousing may also be set up as a part of SEZ for multi product [notification no G.S.R 470(E) dated 10-08-2006]
Special Economic Zone for multi-product means a Special Economic Zone. where Units may be set up for manufacture of two or more goods in a sector or goods falling in two or more sectors or for trading and warehousing or rendering of two or more services in a sector or rendering of services falling in two or more Sector.
Special Economic Zone for specific sector means a Special Economic Zone meant exclusively for one or more productsin a sector or one or more services in a sector.
Special Economic Zone in a port or airport means a Special Economic Zone in an existing port or airport for Special Economic Zone in an existing port or airport for Special Economic Zone.
Activity in SEZ
|Manufacturing / Trading ||Service
|• Apparel, Garments & Leather
• Automobile and Auto Components
• Engineering - Light, Heavy & Application
• Food Processing
• Telecom Equipment
• Computer Hardware & micro- electronics
• Consumer Electronics & Appliances
• Gems, Jewellery & Diamonds
• Wood, Rubber, Plastic &
• Leather Products
• IT enable services Biotechnology
• R & D Services
• Health Care
• Financial Services
• Knowledge (Education) Services
• Entertainment, Leisure & Recreation
• Sports & Related Activities
• Organized Retail
• Business Services (Convention / Exhibition)
• Warehousing & Trade Related Services
Areas Specification for SEZ
Minimum area requirement stipulated for various categories of SEZs are:
• 1 hectare = 2.421 acres = 10,000 sq.metres
• 1000 hectares = 2500 acres
Setting up of an unit in SEZ
Check List of Letter of Approval
1. Whether the application has been submitted in 3 copies and duly completed in all respects.
2. Is project report submitted in 3 copies ?
3. Application Fee paid ?
4. Is DD in favour of Pay & Accounts Officer, Ministry of Industry, New Delhi ?
5. Is evidence for buy-back/marketing tie-up furnished.
6. Is the project included in Schedule I or Schedule II
7. Has the undertaking in the application been signed.
8. Is the list of imported/indigenous capital goods given ?
9. Is list of imported/indigenous Raw Material given?
10. Does the Project Cost and Pattern of Investment tally ?
11. Is area and water requirement furnished (SEZ) ?
12. Are the names and addresses of Directors given ?
13. Is present activity of the applicant given ?
14. Whether details of manufacturing process given ?
15. Is projected Profit & Loss statement given?
16. Is IE Code detail given in case of existing exporter ?
17. Is ITC HS Code of the product given ?
18. Is the application signed in all the pages ?
19. Is the copy of the lease deed executed for minimumfive years furnished ? (in case of EOUs) ?
20. Whether E-mail address is given ?
21. Whether Dollar-conversion rate is given ?
22. Whether foreign technology agreement, if any, is as per RBI guidelines.
23. Is applicant a company, whether partnership deed/ memorandum of articles/certificate of incorporation given.
24. Whether any sector-specific restriction ? (ex. Rice, granite, petroleum etc.)
25. Whether Fact-Sheet duly filled in and signed submitted ?(in case of conversion units)
26. Whether EP & NFEP projected fulfils stipulation of EXIM Policy (Appendix I).
27. Whether self-certified copy of PAN is enclosed.
28. Whether IT return of previous year enclosed.
29. Whether source of finance indicated.
A Records & Returns
The SEZ units and developers are required to maintain proper accounts financial year wise in respect of
• Goods imported, procured from DTA,
• Consumption and utilization of goods,
• Reduction of goods including by products, wastes or scrap or remnants.
• Records in respect of disposal of goods by way of exports, sales or supplies in DTA or transferred to EOU/EHTP/STP/BTP and balance in stock are also to be maintained.
Submission of Annual Performance Reports