Dear All,
Just a little FAQ on SEZs.
1. What is a Special Economic Zone ?
Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.
2. Where in India SEZs are located ?
At present there eight functional Special Economic Zones located at Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Nodia (Uttar Pradesh) in India. Further a Special Economic Zone at Indore ( Madhya Pradesh ) os now ready for operation.
In addition 18 approvals have been given for setting up of SEZ at Positra (Gujarat), Navi Mumbai and Kopata (Maharashtra), Nanguneri (Tamil Nadu), Kulpi and Salt Lake (West Bengal), Paradeep and Gopalpur (Orissa), Bhadohi, Kanpur, Moradabad and Greater Noida (U.P.), Vishakhapatnam and Kakinada (Andhra Pradesh), Vallarpadam/Puthuvypeen (Kerala) Hassan ( Karnataka), Jaipur and Jodhpur ( Rajasthan) on the basis of proposals received from the State Governments.
3. Who can set up SEZs?
Any private/public/joint sector or State Government or its agencies can set up Special Economic Zone (SEZ).
4.Can Foreign Companies set up SEZs ?
Yes.
5.Is there any act which regulates the entire formation/ operations and other functionalities of SEZs in India ?
Yes. The Special Economic Zones Act, 2005 along with the SEZ Rules 2006, 2009 and 2010 regulates the functioning of the SEZs in India.
(For bare text of the act - http://www.sezindia.nic.in/writereaddata/pdf/SEZ%20Act,%202005.pdf)
(For bare text of the rules/ amendments - http://www.sezindia.nic.in/goi-policies-sra.asp)
6.What is the obligation of the Unit under the Scheme?
SEZ units have to achieve positive net foreign exchange earning as per the formula given in paragraph Appendix 14-II (para 12.1) of Handbook of Procedures, Vol.1. For this purpose, a Legal Undertaking is required to be executed by the unit with the Development Commissioner.
The units have to provide periodic reports to the Development Commissioner and Zone Customs as provided in Appendix 14-I F of the Handbook of Procedures, Vol.1.
The units are also to execute a bond with the Zone Customs for their operation in the SEZ.
Any company set up with FDI has to be incorporated under the Indian Companies Act with the Registrar of Companies for undertaking Indian operations
The units have to provide periodic reports to the Development Commissioner and Zone Customs as provided in Appendix 14-I F of the Handbook of Procedures, Vol.1.
The units are also to execute a bond with the Zone Customs for their operation in the SEZ.
Any company set up with FDI has to be incorporated under the Indian Companies Act with the Registrar of Companies for undertaking Indian operations
7.What are the incentive/facilities available for SEZ units?
Followingare some imporatnt incentives/ facilities to SEZ enterprises:
Customs and Excise :
SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any licence or specific approval.
Duty free import/domestic procurement of goods for setting up of SEZ units.
Goods imported/procured locally duty free could be utilised over the approval period of 5 years.
Domestic sales by SEZ units will now be exempt from SAD.
Domestic sale of finished products, by-products on payment of applicable Custom duty.
Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value.
Income tax :
Duty free import/domestic procurement of goods for setting up of SEZ units.
Goods imported/procured locally duty free could be utilised over the approval period of 5 years.
Domestic sales by SEZ units will now be exempt from SAD.
Domestic sale of finished products, by-products on payment of applicable Custom duty.
Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value.
Income tax :
Physical export benefit
100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
Reinvestment allowance to the extend of 50% of ploughed back profits
Carry forward of losses
100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
Reinvestment allowance to the extend of 50% of ploughed back profits
Carry forward of losses
Central Sales Tax Act :
Exemption to sales made from Domestic Tariff Area to SEZ units.
Income Tax Act:
Service Tax:
Income Tax Act:
Service Tax:
Exemption from Service Tax to SEZ units
Companies Act :
Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration
Agreement to opening of Regional office of Registrar of Companies in SEZs.
Exemption from requirement of domicile in India for 12 months prior to appointment as Director.
Agreement to opening of Regional office of Registrar of Companies in SEZs.
Exemption from requirement of domicile in India for 12 months prior to appointment as Director.
7.Whether SEZs have been exempted from Labour laws?
Normal Labour Laws are applicable to SEZs, which are enforced by the respective state Governments. The state Government have been requested to simplify the procedures/returns and for introduction of a single window clearance mechanism by delegating appropriate powers to Development Commissioners of SEZs.
Thanks and Regards,
Pranav Vaidya
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