Export processing zones are typically an enclave of units operating in a well -defined area within the geographical boundary of a country where certain economic activities are promoted by a set of policy measures that are not generally applicable to the rest of the country.
These zones are known by different names such as Free Trade Zones (FTZ), Industrial Free Zone, Export Processing Zones (EPZ), Bonded Free Zones, Maquiladoras (Mexico) and Special Economic Zones (China). The concept of export processing zones is not a new one. An International Labor Organization (ILO) report, states that some of the earliest references of export processing zones date back to thirteen century in Spain. As per the report, The Free Zone Consortium of Cadiz was founded in 1929.In Spain a free zone was set up before the First World War, but it took off only after the Second World War 3.
In recent times, the first Export Processing Zone (EPZ) was set up in 1959 at Shannon, in Ireland and in 1962 Puerto Rico established an EPZ in the island. India is one of the first countries in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports. Asias first EPZ was set up in Kandla in 1965. The proposal for setting up the Kandla Free Trade Zone (KAFTZ) was mooted in 1961, for the following reasons:
a) To facilitate the development of the Kutch region, b) to ensure greater utilization of Kandla Port and c) To create employment opportunities in the Kandla- Gandhidham area.
These zones offer the following facilities: Financial incentives like tax holidays, duty free imports and exports; High quality infrastructure; Abundant and relatively cheap labor; Strategic location and market access. ` However, the EPZ concept had some limitations like: Fixed geographical area, Non-suitability for medium and large industrial units Non-suitability for units which intended to set up units near the source of raw material or specialized labor.
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SPECIAL ECONOMIC ZONES IN INDIA The concept of EPZ was later complemented by schemes like Export oriented scheme which was introduced by the Ministry of Commerce in 1980 vide resolution dated 31st December 1980. The scheme is contained under Chapter 6 of Foreign Trade Policy as amended from time to time.
Over the years the Scheme underwent various changes and its scope also expanded substantially as compared to the initial Scheme, which was basically for manufacturing sector with certain minimum value addition in terms of export earnings. Accordingly, The Government of India first introduced the concept of SEZ in the Export -Import Policy 2000 with a view to provide an internationally competitive and hassle free environment for exports. As the performance of EPZs fell far short of expectations due to various reasons, the SEZs were conceived as a much larger and more efficient form. The policy provides for setting up of SEZs in the public, private, joint sector or by State Governments.
After the introduction of SEZ scheme in the EXIM Policy from 01.04.2000, all existing FTZ/EPZ have been converted to SEZ. What is Special? The word "Special" mainly means special economic systems and policies. In other words, the central government gives the special economic zones special policies and flexible measures, allowing them to utilize a special economic management system. Special tax incentives for foreign investments in the special economic zones. Greater independence on international trade activities. Economic characteristics are represented as "4 primacies": 1) Constructions primarily rely on attracting and utilizing foreign capitals; 2) Primary economic forms are Sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises; 3) Products are primarily export-oriented; 4) Economic activities are primarily driven by market. Special economic Zones are listed separately in the national planning (including financial planning) and have province-level authority on economic administration. The main objectives of SEZ scheme can be briefly stated as: 1. Attract Foreign Direct Investment (FDI) 2. Earn foreign exchange and contribute to exchange rate stability 3. Boost the export sector, especially nontraditional exports 3
4. Create employment opportunities 5. Introduce new technology 6. Develop backward regions 7. Stimulate sectors such as electronics, information technology, R & D, tourism, infrastructure and human resource development that are regarded as strategically important to the economy. 8. Create backward & forward linkages to increase the output and raise the standard of local enterprise that supply goods and services to the zone. The Salient features of Special economic zones include: 1. No License required for import 2. Manufacturing, trading or services activities allowed 3. Full freedom of subcontracting 4. No routine examination of export import cargo by customs authorities 5. SEZ units to have positive net foreign exchange earner 6. Financial incentives like tax holidays, duty free imports and exports 7. Single window clearance 8. High quality infrastructure 9. Strategic location and market access
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ORGANIZATION STRUCTURE
The various modes in which an enterprise can be started are as follows: 1) Proprietorship 2) Partnership 3) (a) Private limited companies (b) Public limited companies 4) HUF 5) Trusts 6) Co-operative societies
Distinguishing characteristics of each of the above are given below:
1) Proprietorship a) It is a single person operation. There is no difference between the owner and the company. b) It is the easiest to establish c) Profit of the company is the owners income. d) Liability is Unlimited i.e. Losses may have to be made good out of the personal assets of the proprietor e) The greatest advantage of such an organization is that it requires minimal legal documentation.
2) Partnership a) Two or more persons can start a partnership b) The maximum number of partners which are permissible in a firm is 20 and in the case of banking firms it is 10 c) A Partnership deed in writing Paper must be made clearly specifying the name of the partnership firm, the names of the partners, the capital to be contributed by each partner, the profit or loss sharing ratio between partners, the business of the partnership, the duties, rights, powers and obligations of each partner and other relevant details. d) It must be signed by all partners and witnessed by independent persons. e) The partnership deed must clearly specify the duties and authorities of all partners. f) Details of salary and other payments to partners must also be clearly specified in the partnership deed. g) It is not compulsory for registration of partnership deeds; however, registration ensures certain legal rights to the firm and its partners. h) The advantages of this form of set-up are that two or more people can come together and start a new business. The disadvantages of this set-up are more or less the same as that of a sole proprietorship concern. i) The liability of partners in Indian partnerships is joint and several. j) There is no minimum capital to be subscribed for a partnership. k) A partnership may be dissolved with the consent of all the partners or in accordance with the provisions in the partnership agreement. 5
3) Companies a) Company as a legal person can borrow, lend, enter into contracts, can sign, can sue and be sued b) Has a life beyond the life of the promoters c) Can hold assets of its own d) Company seal acts as its signature e) Comes into existence through a formal and legal incorporation process. f) Promoters, share holders are called members g) The liability of shareholders of a limited company is limited to the extent of unpaid share or to the tune of the unpaid amount guaranteed by the shareholder. h) Memorandum and Articles of Association-The Memorandum of association is the charter of the company and specifies the name of the company, the business and activities it can carry, its address, the capital of the company and details of the persons who have formed the company. i) The Articles of association of the company specify the rules and regulations of the company, the rights, duties and liabilities of the members and directors j) A memorandum of association and articles of association have to be filed with the Registrar of Companies in order to incorporate a company In India, companies are broadly classified as Public Sector (Government owned) and Private Sector Companies. Private Sector companies may further be classified as Private Limited and Public Limited Companies.
3) (a) Private Limited Companies Private Limited Company means a company formed with the word private in its name .A private limited company can be formed with a minimum of 2 members. The Articles of Association of such companies includes the following restrictions:- i. Articles of association restricts the right to transfer its shares ii. Limitation to the number of shareholders to 50 (excluding employees and former employees) iii. Prohibition towards invitation to the public to subscribe to shares and debentures iv. Shares of private limited companies may not be quoted in the stock exchange v. The minimum paid up capital for a private company would be Rs. 100,000. vi. Following are some of the privileges and exemptions of a private limited company: 1) Minimum number of members required is 2 (7 in case of public companies) 2) The prohibition of allotment of the shares or debentures in certain cases unless statement in lieu of prospectus has been delivered to the Registrar of Companies does not apply to a private limited company. 3) Restriction contained in Section 81 related to the rights issues of share capital does not apply. A special resolution to issue shares to non-members is not required in case of a private company. 4) Restriction contained in Section 149 on commencement of business by a company does not apply. A private company does not need a separate certificate of commencement of business. 5) Provisions of Section 165 relating to statutory meeting and submission of statutory report do not apply. 6
6) one (if 7 or fewer members are present) or two members (if more than 7 members are present) present in person at a meeting of the company can demand a poll. 7) In case of a private company which is not a subsidiary of a public limited company or in the case of a private company of which the entire paid up share capital is held by the one or more body corporate incorporated outside India, no person other than the member of the company concerned, shall be entitled to inspect or obtain the copies of profit and loss account of that company. 8) Minimum number of directors is only two. (3 in case of a public company)
3) (b) Public Limited Companies
Public Limited Company means a company which is not a private limited company. It does not carry the word private in its name and also do not have the restrictions as carried out in the private limited companies. Public limited companies are generally large companies with widespread shareholding with shares being quoted in the stock exchange. The minimum paid up capital for a public company would be Rs. 500,000.
Distinction between Company and Partnership
1. A Partnership firm is sum total of persons who have come together to share the profits of the business carried on by them or any of them. It does not have a separate legal entity. A Company is association of persons who have come together for a specific purpose. The company has a separate legal entity as soon as it is incorporated under law. 2. Liability of the partners is unlimited. However, the liability of shareholders of a limited company is limited to the extent of unpaid share or to the tune of the unpaid amount guaranteed by the shareholder. 3. Property of the firm belongs to the partners and they are collectively entitled to it. In case of a company, the property belongs to the company and not to its members. 4. A partner cannot transfer his shares in the partnership firm without the consent of all other partners. In case of a company, shares may be transferred without the permission of the other members, in absence of provision to contrary in articles of association of the company. 5. In case of partnership, the number of members must not exceed 20 in case of banking business and 10 in other businesses. A Public company may have as many members as it desires subject to a minimum of 7 members. A Private company cannot have more than 50 members. 6. There must be at least 2 members in order to form a partnership firm. The minimum number of members necessary for a public limited company is seven and two for a private limited company. 7. In case of a partnership, 100 % consensus is required for any decision. In case of a company, decision of the majority prevails. 8. On the death of any partner, the partnership is dissolved unless there is provision to the contrary. On the death of the shareholder the company existence does not get terminated.
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4) Hindu Undivided family- HUF This form of organization exists under Hindu law and is governed by the law of succession. The joint Hindu family form is a form of business organization in which the Family possesses some inherited property. The inheritance of the property is among the male members. The share of ancestral property is inherited by a member from his father, Grandfather and great grandfather.
The important features of the joint Hindu family business are as follows:
(i) Membership by birth: Membership of the joint Hindu family business is automatic by birth of a male child and is not created by an agreement between persons. (ii) Management: The management vests in the Karta, the eldest member of the family. However, the Karta may associate other members of the HUF to assist him. (iii) Liability: The Karta has unlimited liability, i.e., even her/his personal assets can be used for payment of business dues but every other coparcener has a limited liability up to his share in the HUF property. (iv) There is no restriction on the number of coparceners of the HUF business. However, the membership is restricted to three successive generations. A male child at the time of birth becomes a coparcener. Thus, an HUF does not restrict membership to minors. (vi) Unaffected by death: The HUF business continues even after the death of a coparcener including the Karta. The next senior most surviving male member of the HUF becomes the Karta. However, it may come to an end if all the members notify that they are not members of the joint Hindu family.
5) Trusts
A Trust is created when a donor attaches a legal obligation to the ownership of certain property based on his confidence placed in and accepted by the donee or trustee, for the benefit of another.
The person who intends to create the trust with regard to certain property for a specified beneficiary and who places his confidence in another for this arrangement is called the Author of the Trust; the person who accepts the confidence is called the Trustee; the person whose benefit the confidence is accepted is called the Beneficiary; the subject matter of the trust is called Trust Property.
The Trustees control the trusts assets and decide how the income (and capital) of the trust is to be distributed, and ensure that it is in line with the charitable purposes of the trust.
The author of the trust must indicate with reasonable certainty the following: Intention to create trust Purpose of the trust Beneficiaries of the trust, and The trust property 8
A trust can be created- a. By any person competent to contract b. With the permission of a principal civil court of original jurisdiction by or on behalf of a minor c. Any person or corporation capable of transferring property or interest in property can create a Trust d. A company can create a Trust provided it is intra vires the objects of the company and within the powers mentioned in its Memorandum of Association.
Trust can be a public trust, set up for the benefit of the general public or a private family trust that is restricted to specified individuals. Trusts are governed by The Indian Trusts Act, 1982
6) Co-operative Societies A cooperative form of business organization is different from other forms of organization. It is a voluntary association of persons for mutual benefit and its aims are accomplished through self- help and collective effort. The main principle underlying a cooperative organization is mutual help, i.e., each for one and all for each. A minimum of 10 people are required to form cooperative society. It must be registered with the Registrar of Cooperative Societies under the Cooperative Societies Act. The capital of a cooperative society is raised from its members by way of share capital. It can also obtain additional resources by way of loans from the State and Central Cooperative Banks.
Although a cooperative society has much in common with partnership there are differences between the two types of organization. In a partnership mutual benefit is restricted to partners only, but in a cooperative society it extends to its member as also the public. For example, in a consumer cooperative store or a cooperative credit society, the benefits are available to the members as well as the general public. Besides, partnership requires the existence of some business activity whereas a cooperative may be formed whenever individuals have common needs which are difficult to fulfill single handed. Also, registration is optional in the case of partnership but it is compulsory for a cooperative society.
The main advantages of a co-operative society are: Easy formation Open membership Democratic management Limited liability (to the extent of capital contributed by the members) Stability (as it enjoys separate legal existence) Economic operations Government patronage
Cooperative society are governed by the Co-operative Societies Act, 1912 and Multi-State Co- Operative Societies Act, 1984
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OVERVIEW OF THE SPECIAL ECONOMIC ZONES ACT, 2005
The Special Economic Zones Act, 2005 consists of 8 chapters, 58 sections and 3 schedules.
The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act (Section 51)
The following table provides an insight to the Special Economic Zones Act 2005:
CHAPTER SECTIONS TITLE I 1-2 Preliminary II 3-7 Establishment of SEZ III 8-10 Constitution of Board of Approval IV 11-12 Development Commissioner V 13-15 Single Window Clearance VI 26-30 Special Fiscal provisions for SEZ VII 31-41 Special Economic Zone Authority VIII 42-58 Miscellaneous The First Schedule Enactments The Second Schedule Modifications of the Income Tax Act-1961 The third schedule Part I Amendments to certain Enactments Part II Amendments to the Banking Regulation Act,1949 Part III Amendments to the Indian Stamp Act,1899
The Special Economic Zones Act 2005 provides for the following:
1) Procedure for making proposal to establish SEZ (Sec 3) 2) Establishment of SEZ with the approval from Board of Approvals (Sec 4) 3) Notifying an area as SEZ by Central Government (Sec 5) 4) Approval by Board of Approval for establishment of SEZ (Sec 8 to 10) 5) Development Commissioner as administrative Authority for the SEZ (Sec 11 and 12) 6) Approval Committee to approve setting up of a unit in SEZ (Sec 13 and 14) 10
7) Single window clearance by Approval Committee for setting up unit in SEZ, setting up an OBU and setting up an IFSC (Sec 15 to 20) 8) Enforcement officer or agency for notified offences (Sec 21 and 22) 9) Special civil courts and criminal courts to try notified offences and appeal to High Court (Sec 23 and 24) 10) Special Fiscal provisions for special economic zones (Sec 26 to 30) 11) Establishment of SEZ Authority (Sec 31 to 41) 12) Reference of dispute to arbitration (Sec 42 and 43) 13) Exemptions and relaxations from provisions of some Central Acts (Sec 49 and 54) 14) Power of the Central Government to make rules and to remove difficulties (Sec 55 and 56)
Given below are a few important Definitions in the Act
Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval and includes an Authority and a Co-Developer (Section 2(g))
Domestic Tariff Area means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones (Section 2(i))
Export means (i) Taking goods, or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise; or (ii) Supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer. (iii) Supplying goods, or providing services, from one Unit to another Unit or Developer, in the same or different Special Economic Zone (Section 2(m))
Free Trade and Warehousing Zone means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on; (Section 2(n))
Import means (i) Bringing goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode, whether physical or otherwise; or (ii) Receiving goods, or services by, Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone ( Section 2(o))
Infrastructure facilities means industrial, commercial or social infrastructure or other facilities necessary for the development of a Special Economic Zone or such other facilities which may be prescribed (Section 2(p))
International Financial Services Centre means an International Financial Services Centre which has been approved by the Central Government under sub-section (1) of section 18; (Section 2(q))
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Manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re- engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining; (Section 2(r))
Person includes an individual, whether resident in India or outside India, a Hindu undivided family, co-operative society, a company, whether incorporated in India or outside India, a firm, proprietary concern, or an association of persons or body of individuals, whether incorporated or not ,local authority and any agency, office or branch owned or controlled by such individual, Hindu undivided family, co-operative, association, body, authority or company (Section 2(v))
Services means such tradable services which,- (i) Are covered under the General Agreement on Trade in Services annexed as IB to the Agreement establishing the World Trade Organization concluded at Marrakes on the 15th day of April, 1994; (ii) May be prescribed by the Central Government for the purposes of this Act; and (iii) Earn foreign exchange (Section 2(z))
Unit means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after commencement of this Act (Section 2 (c))
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Overview of the Special Economic Zones Rules, 2006
The policy relating to special economic zones is contained in Special Economic Rules, 2006 notified in the Gazette of India, Extraordinary No. GSR 54 (E), dated 10.2.2006. The Rules contain 8 chapters, 77 rules, 11 forms - A to K and 2 Annexures
The following table provides an insight to the Special Economic Zones Rules, 2006
CHAPTER RULES TITLES I 1-2 Preliminary II 3-16 Procedure for establishment of SEZ III 17-21 Procedure for establishment of an unit IV 22-46 Terms and conditions subject to which entrepreneur and developers shall be entitled to exemptions, drawbacks and concessions V 47-52 Conditions subject to which goods may be removed from a SEZ to DTA VI 53-54 Foreign Exchange earning Requirements and Monitoring VII 55-69 Appeal VIII 70-77 Miscellaneous
The Special Economic Zones Rules, 2006 provides for the following:
1. Simplification of procedures for development, operation, and maintenance of the Special Economic Zones and for setting up and conducting business in SEZs; 2. Single window clearance for setting up of an SEZ; 3. Single window clearance for setting up a unit in a Special Economic Zone; 4. Single Window clearance on matters relating to Central as well as State Governments; 5. Simplified compliance procedures and documentation with an emphasis on self-certification; and 6. A wide range of services can be rendered from SEZs.
Other significant features of the Rules are:
1. Documentation for various activities of the units has been reduced to the barest minimum with an emphasis on self-certification. 2. No requirement for providing bank guarantees, thereby reducing transaction costs; 13
3. Contract manufacturing for foreign principals allowed; 4. Option to obtain sub-contracting permission at the initial approval stage; 5. Import-Export of all items, through personal baggage has been allowed.
Important definitions in the Rules include:
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 sectors (Rule 2(za))
Special Economic Zone for specific sector means a Special Economic Zone meant exclusively for one or more products in a sector or one or more services in a sector (Rule 2(zb))
Special Economic Zone in a port or airport means a Special Economic Zone in an existing port or airport for manufacture of goods in two or more goods in sector or goods falling in two or more sectors or for trading and warehousing or rendering of services (Rule 2(zc))
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DEVELOPMENTS ON SPECIAL ECONOMIC ZONES
A) Special Economic Zones (Amendment) Rules, 2006 B) Removal of caps on SEZ C) List of authorized activities in non-processing area of SEZs to be notified D) Criteria for approval of SEZ developers E) No SEZ on prime agriculture Land
An amendment has been made in the Special Economic Zones Rules by way of -The Special economic Zones (Amendment) Rules, 2006 which came into force on 10.08.2006.
The relevant notification is reproduced hereunder:
A) Special Economic Zones (Amendment) Rules, 2006
Special Economic Zones (Amendment) Rules, 2006 - Amendments in rules 5, 11, 18 and 76; insertion of rule 5A Notification NO G.S.R. 470(E), dated 10-8-2006
In exercise of the powers conferred by section 55 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby makes the following rules to amend the Special Economic Zones Rules, 2006, namely:
1. (1)These rules may be called the Special Economic Zones (Amendment) Rules, 2006. (2)They shall come into force on the date of their publication in the Official Gazette.
2. In the Special Economic Zones Rules, 2006 (hereinafter referred to as the principal rules), in sub-rule (2) of rule 5, (1) In clause (a), for the third provision, the following proviso shall be substituted, namely: Provided also that at least thirty-five per cent of the area shall be earmarked for developing the processing area, which may be relaxed up to twenty-five per cent by the Central Government on recommendations of the Board for the reasons to be recorded in writing;; (2) In clause (b) in the second proviso, for the words the area shall be ten hectares or more, The following shall be substituted, namely: The area shall be ten hectares or more with a minimum built-up area as under: (i) forty thousand square meters in case of a Special Economic Zone proposed to be set up exclusively for bio-technology and non-conventional energy sectors including solar energy equipments/cells but excluding a Special Economic Zone set up for non-conventional energy production and manufacturing; (ii) fifty thousand square meters in case of a Special Economic Zone proposed to be set up exclusively for the gems and jewelry sector.
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(3) In clause (c), (i) For the first provision, the following proviso shall be substituted, namely: Provided that in a standalone Free Trade and Warehousing Zone at least fifty per cent of the area shall be earmarked for developing processing area : Provided further that a Free Trade and Warehousing Zone may also be set up as part of a Special Economic Zone for multi-product (ii) In the second proviso, for the words provided further, the words provided also shall be substituted.
3. After rule 5 of the principal rules, the following rule shall be inserted, namely: 5A. Infrastructure requirements relating to information technology.In case of a Special Economic Zone relating to information technology, the following facilities shall be ensured, namely: (a) twenty-four hours uninterrupted power supply at stable frequency in the zone; (b) Reliable connectivity for uninterrupted and secure data transmission; (c) Provision for central air-conditioning system; and (d) A ready to use, furnished plug and pay facility for end users..
4. For sub-rule (10) of rule 11 of the principal rules, the following sub-rule shall be substituted, namely: (10) No vacant land in the non-processing area shall be leased for business and social purposes 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 Provided that the developer or co-developer may lease the completed infrastructure along with the vacant land appurtenant thereto for such purposes: Provided further that infrastructure for business or social purposes in the Special Economic Zone, as may be approved by the Board, shall be eligible for exemptions, concessions and drawback.
5. In sub-rule (4) of rule 18 of the principal rules, after clause (f), the following clause shall be inserted, namely: (g) the use of any plant or machinery previously used for any purpose in Domestic Tariff Area.
6. In rule 76 of the principal rules, (i) For the words sub-clause, the word clause shall be substituted; (ii) The following Explanation shall be inserted at the end, namely: Explanation.the expression Trading, for the purposes of the Second Schedule of the Act, shall mean import for the purposes of re-export.
The effect of this notification which is mainly on area requirements and processing area can be summarized as following. 16
Area requirements for different SEZ can be summarized as under: 17
Besides the above, the other changes made are as follows:
a) Infrastructure requirements relating to information technology A new rule 5 A has been inserted detailing infrastructure facilities that a Developer of Information Technology specific SEZ should provide. They include:
1) Twenty four hour uninterrupted power supply at stable frequency; 2) Reliable connectivity for uninterrupted and secure data transmission; 3) Central air-conditioning system; 4) Ready to use, furnished plug and pay facility for end users.
b) A Developer was earlier permitted to allot land in the non-processing area for business and social purposes. The SEZ Amendment Rules have amended the above condition to the effect that no vacant land in the non-processing area shall be leased for business and social purposes to any person except a Co-developer approved by the Board. Further, it has been provided that a Developer or Co-developer may lease completed infrastructure along with vacant land appurtenant thereto.
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c) Previously used Plant & Machinery It has been provided that any proposal for setting up SEZ Unit by using plant and machinery previously used for any purpose in the Domestic Tariff Area (DTA) shall not be considered.
d) Trading activity in the SEZ The SEZ Rules have been amended to provide to the effect that for claiming Income-tax benefits, the term trading shall mean import for the purpose of re-export. This means profits from trading (exports) of locally procured goods shall not be eligible for Income-tax benefits.
B) Removal of caps on SEZ The empowered Group of Ministers on Special Economic Zones, headed by the Defense Minister, Mr Pranab Mukherjee, decided on 23.08.2006 to remove the existing cap of 150 for the number of SEZs that can be established within the country.
C) List of authorised activities in non-processing area of SEZs to be notified and
D) Criteria for approval of SEZ developers
The Board of Approvals in its meeting held on 21st September, 2006 discussed and decided the procedure to be adopted by the Board of Approval while approving infrastructure in the non- processing area of the Special Economic Zones. In this regard, it was decided that the Central Government will notify a list of authorized operations (Annex. I). This list would be used by the Board of Approval for authorizing operations which only would qualify for exemptions, concessions and drawback. The Board of Approvals also agreed on certain criteria (Annex. II) to be followed by the Board for approval of SEZ Developers
Annexure-I List of authorized operations eligible for approval by the Board of Approval
(A) IT/ITES, Bio-technology & Gems & Jewelry SEZ: i. Roads with Street lighting, Signals & Signage ii. Water treatment plant, water supply lines (dedicated lines upto source), sewage lines, storm water drains and water channels of appropriate capacity iii. Sewage and garbage disposal plant, pipelines and other necessary infrastructure for sewage and garbage disposal, Sewage treatment plants iv. Electrical, Gas & PNG Distribution Network including necessary sub-stations of appropriate capacity, pipeline network etc v. Security offices, police posts, etc, at entry, exit and other points within and along the periphery of the site. vi. Effluent treatment plant and pipelines and other infrastructure for Effluent treatment vii. Office space viii. Parking including Multi-level car parking (automated / manual) 19
ix. Telecom and other communication facilities including internet connectivity x. Rain water harvesting plant xi. Power (including power back up facilities) xii. Air conditioning xiii. Swimming pool xiv. Fire protection system with sprinklers, fire and smoke detectors xv. Recreational facilities including club house, Indoor/Outdoor games, gymnasium xvi. Employee welfare facilities like ATMs, Crche, Medical center and other such facilities xvii. Shopping arcade/Retail space xviii. Business/Convention Centre xix. Common Data Centre with inter-connectivity xx. Housing/Service apartments xxi. Play ground xxii. Bus bay xxiii. Food Services including Cafeteria, food court(s), Restaurants, coffee shops, canteens and catering facilities xxiv. Landscaping and water bodies xxv. Clinic & Medical Centers xxvi. Wi Fi/Wi Max Services xxvii. Drip and Micro irrigation systems xxviii. Any other operation ancillary or incidental to operations specified above from (i) to (xxviii) which the Board of Approval may authorize from time to time.
(B) Sector Specific SEZs i) Roads with Street lighting, Signals and Signage. ii) Water treatment plant, water supply lines, sewage lines, storm water drains and water channels of appropriate capacity iii) Sewage and garbage disposal plant, pipelines and other necessary infrastructure for sewage and garbage disposal and Sewage treatment plants iv) Electrical, Gas & PNG Distribution Network including necessary sub-stations of appropriate capacity, pipeline network etc. v) Security offices and police posts at entry, exit and other points within and along the periphery of the site. vi) Effluent treatment plant and pipelines and other infrastructure for Effluent treatment vii) Office space/Shopping arcade/Retail space/ Multiplex viii) Housing ix) Hotel/Service apartments x) Clinic / Medical Centers/ Hospital xi) School/Technical Institution/Educational Institution xii) Parking including Multi-level car parking (automated / manual) xiii) Telecom and other communication facilities including internet connectivity xiv) Business/Convention Centre xv) Common Data center with inter-connectivity xvi) Rain water harvesting plant 20
xvii) Power (including power back up facilities) xviii) Rail head xix) Access control and Monitoring system xx) Swimming pool xxi) Fire Station, Fire protection system with sprinklers, fire and smoke detectors xxii) Recreational facilities including club house, Indoor/Outdoor games and gymnasium xxiii) Employee welfare facilities like ATMs, Crche, Medical center and other such facilities xxiv) Play grounds xxv) Bus bays xxvi) Food Services including Cafeteria, food court(s), Restaurants, coffee shops, canteens and catering facilities xxvii) Landscaping and water bodies xxviii) Wi Fi/Wi Max Services xxix) Drip and Micro irrigation systems xxx) Any other operation ancillary or incidental to operations specified above from (i) to (xxix) which the Board of Approval may authorize from time to time.
(C) Multi Product SEZs i. Roads with Street lighting, Signals and Signage ii. Water treatment plant, water supply lines, sewage lines, storm water drains and water channels of appropriate capacity iii. Sewage and garbage disposal plant, pipelines and other necessary infrastructure for sewage and garbage disposal and Sewage treatment plants iv. Electrical, Gas & PNG Distribution Network including necessary sub-stations of appropriate capacity, pipeline network etc v. Security offices and police posts at entry, exit and other points within and along the periphery of the site. vi. Effluent treatment plant and pipelines and other infrastructure for Effluent treatment vii. Office space/Shopping arcade/Retail space/multiplexes viii. Housing ix. Hotel x. Clinic /Medical Centers / Hospital xi. School/Technical Institution/Educational Institution xii. Parking including Multi-level car parking (automated / manual) xiii. Access control and Monitoring system xiv. Telecom and other communication facilities including internet connectivity.
xv. Rain water harvesting plant xvi. Power (including power back up facilities) xvii. Swimming pool xviii. Fire Station, Fire protection system with sprinklers, fire and smoke detectors xix. Rail head within the SEZ xx. Port xxi. Airport/Air Cargo Complex 21
xxii. ICD xxiii. Banks xxiv. Recreational facilities including club house, Indoor/outdoor games and gymnasium. xxv. Employee welfare facilities like ATMs, Crche, Medical center and other such facilities xxvi. Play grounds xxvii. Golf course xxviii. Bus bays xxix. Food Services including Cafeteria, food court(s), Restaurants, coffee shops, canteens and catering facilities xxx. Landscaping and water bodies xxxi. Wi Fi/Wi Max Services xxxii. Drip and Micro irrigation systems xxxiii. Any other operation ancillary or incidental to operations specified above from (i) to (xxxii) which the Board of Approval may authorize from time to time.
Annexure II
Criteria to be followed by the Board for approval of SEZ Developers 1. Minimum Investment or Net worth of the Promoter Company & all Group companies & Flagship companies as follows a) Sector specific SEZs: Minimum investment of Rs.250 crores or net worth of Rs.50 crores b) Multi product SEZs: Minimum investment of Rs.1000 crores or net worth of Rs.250 crores
Proposals not meeting the above minimum investment or net worth criteria with enough justification for the same, to be considered on merits by the Board of Approvals.
No SEZ on prime agriculture Land
Land being a state subject, the Centre has directed the states that mainly waste and barren land and if necessary single crop agricultural land alone should be acquired for the SEZ.
It has been further clarified that if perforce a portion of double-cropped agricultural land has to be acquired to meet the minimum area requirements, the same should not exceed 10% of the total land required for the SEZs.
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FLOWCHART FOR ESTABLISHMENT OF SEZ
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GUIDELINES FOR NOTIFYING SEZ The Central Government, while notifying any area as a Special Economic Zone or an additional area to be included in the Special Economic Zone and discharging its functions under this Act, shall be guided by the following, namely:- a) Generation of additional economic activity b) Promotion of exports of goods and services; c) Promotion of investment from domestic and foreign sources; d) Creation of employment opportunities; e) Development of infrastructure facilities; and f) Maintenance of sovereignty and integrity of India, the security of the State and friendly relations with foreign States.
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FLOWCHART FOR SETTING UP A UNIT
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CHECKLIST FOR THE PROPOSALS TO BE TAKEN BY BOARD OF APPROVAL A checklist in the following format may be submitted by the applicant in respect of all the proposals of SEZs, besides the existing requirement of submission of Form A and project reports. 1. Name of the Developer. 2. Proposed area of the location of the SEZ. 3. Status of recommendation of the proposal by the State Government (if available). 4. Whether proposal is for formal or in-principle approval? (In case land is in possession of the promoter, it is considered for formal approval) 5. Is it a multi-product SEZ? 6. If it is a sector specific SEZ, the sector is. 7. Whether it meets the area requirements. 8. Area of the SEZ (in hectares) 9. Whether Form- A has been filed? 10. Whether undertaking and affidavit has been submitted? 11. Whether project report has been submitted? 12. Whether land is owned/ leased and is in possession of the Developer? 13. Does the proposal meet the area requirements of the Rules? 14. Whether the land has existing structures or is vacant? 15. Whether the land is contiguous? 16. Projected investment in the project. 17. Projected exports from the project. 18. Projected employment from the project. 19. Share capital and Reserves of the Developer Company. 20. Source of funds for the project. 26
21. Audited Accounts of the Developer for last 3 Years (for all the constituents in case the Developer is a SPV). If the company is a new company, audited accounts of Flagship Company may be provided. 22. Extent of FDI 23. Source of FDI 24. Whether provisions contained in the Press Note No. 5 (2005 Series), issued by the Ministry of Commerce and Industry have been followed in respect of Telecom/IT SEZ development?
Proposals not to be considered- Rule 18(4) (a) Recycling of plastic scrap or waste: (b) Enhancement of the approved import quantum of plastic waste and scrap beyond the average annual import quantum of the unit since its commencement of operation to the existing Units; (c) Reprocessing of garments or used clothing or secondary textiles materials and other recyclable textile materials into clipping or rags or industrial wipers or shoddy wool or yarn or blankets or shawls: (d) Import of other used goods for recycling Reconditioning, repair and reengineering may be permitted subject to the condition that exports shall have one to one correlation with imports and all the reconditioned or repaired or re-engineered products and scrap or remnants or waste shall be exported and none of these goods shall be allowed to be sold in the Domestic Tariff Area or destroyed; (e) Export of Special Chemicals, Organisms, Materials, Equipment and Technologies unless it fulfills the conditions indicated in the Import Trade Control (Harmonized System) Classifications of export and import items; (f) If there is any instance of violation of law or public policy by the promoters, having a bearing on the merits of the proposal. (g) The use of any plant or machinery previously used for any purpose in Domestic Tariff Area. (Inserted by Special Economic Zones (Amendment) Rules, 2006
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POINTS TO BE NOTED AFTER NOTIFICATION OF SEZ 1) Grant of Approval for authorized operations: All exemptions, drawbacks and concessions shall be available as per procedure laid down in Rule 12 after the SEZ has been notified in the Gazette (Rule 9 of The Special Economic Zones Rules, 2006). The normal time period for a SEZ to be notified is one month from date of approval 2) Permission for procurement of items: (Rule 10 of The Special Economic Zones Rules, 2006) a) These benefits will also be available to the contractors appointed by the developer/co- developer and all the documents in such cases shall bear the name of the developer or co- developer along with the contractor and these shall be filed jointly in the name of the developer or co-developer and the contractor. b) The developer or co-developer shall be responsible and liable for proper utilization of goods in all cases. 3) Processing and Non-processing area: a) The Development Commissioner of the SEZ shall be the authority for demarking the areas within the SEZ (Rule 11(1) of The Special Economic Zones Rules, 2006) b) Only authorized persons shall be allowed to enter the processing area of the SEZ (Rule 11(4) of The Special Economic Zones Rules, 2006) c) The land or built up space in the processing area or FTWZ shall be given on lease only to the entrepreneurs holding a valid Letter of Approval issued under Rule 19 and the lease period shall be co-terminus with the validity of the Letter of Approval (Rule 11(5) of The Special Economic Zones Rules, 2006) d) The Developer may with the prior approval of the Approval committee grant on lease land or built up space for creating facilities such as canteen, public telephone booths, first aid centers, crche and such other facilities as may be requires for the exclusive use of the unit(proviso to Rule 11(5) of The Special Zones Rules,2006) e) The developer may allot land in the processing area on lease basis to a person desiring to create infrastructure facilities for use by prospective units. (Rule 11(8) of the Special Economic Zones Rules, 2006) f) The developer shall not sell the land in a SEZ (Rule 11(9) of The Special Economic Zones Rules, 2006) g) No vacant land in the non-processing area shall be leased for business and social purposes such as educational institutions, hospitals, hotels, recreation and entertainment facilities, 28
residential and business complexes, to any person except a co-developer approved by the Board. However, the developer or co-developer may lease the completed infrastructure along with the vacant land appurtenant thereto for such purposes (amended Rule 11(10) of The Special Economic Zones Rules, 2006) h) Infrastructure for business or social purposes in the Special Economic Zone, as may be approved by the Board, shall be eligible for exemptions, concessions and drawback. (Amended Rule 11(10) of the Special Economic Zones Rules, 2006) 4) Cancellation of letter of approval to entrepreneur: Sec 16 of The Special Economic Zones Act, 2005 (i) The approval Committee may at any time if it has any reason to believe that the entrepreneur has persistently contravened any of the terms and conditions or its obligations subject to which the letter of approval was granted to the entrepreneur, cancel the letter of approval (ii) No such letter of approval shall be cancelled unless the entrepreneur has been afforded a reasonable opportunity of being heard. 5) Monitoring- Rule 15 of the Special Economic Zones Rules, 2006 The utilization of the goods imported or procured from the Domestic Tariff Area by the Developer shall be monitored by the Approval Committee. 6) Letter of Approval to a unit- Rule 19 of The Special Economic Zones Rules, 2006 a) The Letter of Approval shall be valid for one year within which period the Unit shall commence production or service or trading or Free Trade and Warehousing activity and the Unit shall intimate date of commencement of production or activity to Development Commissioner b) Further extension may be granted by the Development Commissioner for valid reasons to be recorded in writing for a further period not exceeding two years on a request by the entrepreneur c) The Development Commissioner may grant further extension of one year subject to the condition that two-thirds of activities including construction, relating to the setting up of the Unit is complete and a chartered engineers certificate to this effect is submitted by the entrepreneur. d) If the Unit has not commenced production or service activity within the validity period or the extended validity period the Letter of Approval shall be deemed to have been lapsed with effect from the date on which its validity expired. e) The Letter of Approval shall be valid for five years from the date of commencement production or service activity and it shall be construed as a license for all purposes related to authorized operations, and, after the completion of five years from the date of commencement 29
of production, the Development Commissioner may, at the request of the Unit, extend validity of the Letter of Approval for a further period of five years, at a time. f) If an enterprise is operating both as a Domestic Tariff Area unit as well as a Special Economic Zone Unit, it shall have two distinct identities with separate books of accounts, but it shall not be necessary for the Special Economic Zone unit to be a separate legal entity. 7) Bond cum Legal undertaking- Rule 22 (1) of The Special Economic Zones Rules, 2006 (i) The Unit shall execute a Bond-cum-Legal Undertaking in Form H, with regard to its obligations regarding proper utilization and accountal of goods, including capital goods, spares, raw materials, components and consumables including fuels, imported or procured duty free and regarding achievement of positive net foreign exchange earnings; (ii) Bond-cum-Legal Undertaking executed by the Unit or the Developer including Co-Developer shall cover one or more of the following activities, namely: - (a) The movement of goods between port of import or export and the Special Economic Zone; (b) The authorized operations, as applicable to Unit or Developer; (c) Temporary removal of goods or goods manufactured in Unit for the purposes of repairs or testing or calibration or display or processing or sub-contracting of production process or production or other temporary removals into Domestic Tariff Area without payment of duty; (d) Re-import of exported goods. (iii) The Bond-cum-Legal undertaking, where the entrepreneur or Developer is a company shall be executed by the Managing Director of the company or the Director(s) or any person who has or have been duly authorized for this purpose by a resolution of the Board of Directors of the company and shall be affixed with the common seal of the company. (iv) The value of the Bond-cum-Legal undertaking shall be equal to the amount of effective duties leviable on import o procurement from the Domestic Tariff Area of the projected requirement of capital goods, raw materials, spares, consumables, intermediates, components, parts, packing materials for three months as applicable but which will not be levied on account of admission of such goods into the Unit or the amount of effective duties leviable on import or procurement from Domestic Tariff Area of the projected requirements of goods for the authorized operation by the developer but will not be levied on account of admission of such goods into the Special Economic Zone; (v) If the value of Bond-cum-Legal undertaking executed falls short on account of requirement of additional goods, the Unit or the Developer shall submit additional Bond-cum-Legal Undertaking; (vi) If no communication is received within seven working days from the date of its submission, the duly completed Bond-cum-legal undertaking executed by the Unit or Developer, in accordance with the rules above, as the case may be, shall be deemed to have been accepted, 30
8) Maintenance of accounts and submission of performance report- Rule 22(2) of The Special Economic Zones Rules, 2006 (i) Every Unit and Developer shall maintain proper accounts, financial year wise, (ii) Such accounts which should clearly indicate in value terms the goods imported or procured from Domestic Tariff Area, consumption or utilization of goods, production of goods, including by-products, waste or scrap or remnants, disposal of goods manufactured or produced, by way of exports, sales or supplies in the domestic tariff area or transfer to Special Economic Zone or Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park Units or Biotechnology Park Unit, as the case may be, and balance in stock (iii) Unit and Developer shall maintain such records for a period of Seven years from the end of relevant financial year (iv)The Unit shall submit Annual Performance Reports in Form I, to the Development Commissioner and the Development Commissioner shall place the same before the Approval Committee for consideration. 9) Utilization of goods Rule 34 of The Special Economic Zones Rules, 2006 (i) The goods admitted into a Special Economic Zone shall be used by the Unit or the Developer only for carrying out the authorized operations (ii) If the goods admitted are utilized for purposes other than for the authorized operations or if the Unit or Developer fails to account for the goods as provided under these rules, duty shall be chargeable on such goods as if these goods have been cleared for home consumption 10) Movement of goods to and from non-processing area- Rule 40 of The Special Economic Zones Rules, 2006 The movement of goods to and from non-processing area to a processing area and from one processing area of Special Economic Zone to a different processing area of the same Special Economic Zone shall be under serially numbered challans pre-authenticated by the owner or Managing Director or working partner or the company secretary or by any person duly authorized in this behalf by the company or firm, as the case may be, and the challans shall contain complete description of goods. 11) Monitoring of performance- Rule 54 of The Special Economic Zones Rules, 2006 (i) Performance of the Unit shall be monitored by the Approval Committee (ii) In case the Approval Committee finds that a Unit has not achieved positive Net Foreign Exchange Earning or failed to abide by any of the terms and conditions of the Letter of Approval or Bond-cum-Legal Undertaking, the said Unit shall be liable for penal action under the 31
provisions of the Foreign Trade (Development and Regulation) Act, 1992(without prejudice to the action that may be taken under any other law for the time being in force) 12) Identity Cards -Rule 70 of the Special Economic Zones Rules, 2006 (i) The entry of persons to the processing area of the Special Economic Zone shall be regulated by the Development Commissioner through issue of identity cards. (ii) This identity card shall be valid up to a period of five years and shall be issued, in the format given in Form K, to the entrepreneurs and regular employees of the Units. (iii) If any employee who has been issued an identity card ceases to be in employment of the Unit or Developer, the said identity card shall be surrendered forthwith and shall be deemed to be invalid from such date (iv)Temporary identity card may be issued by the Development Commissioner to the casual visitors and contractors and a proper record of such entries shall be maintained at the Special Economic Zone Gate; 13) Foreign Exchange Remittances- Rule 71 of the Special Economic Zones Rules, 2006 Export value of goods, software and services may be realized and repatriated as per instructions of the Reserve Bank of India issued from time to time.
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FACILITIES/ EXEMPTIONS/ BENEFITS TO SPECIAL ECONOMIC ZONES 1) Exemption from Taxes, Duties or Cess Sec 7 & Sec 54 of the Special Economic Zones Act, 2005 Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by, - (i) A Unit in a Special Economic Zone; or (ii) A Developer; Shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule THE FIRST SCHEDULE (See sections 7 and 54) Enactments 1. The Agricultural Produce Cess Act, 1940 (27 of 1940). 2. The Coffee Act, 1942 (7 of 1942). 3. The Mica Mines Labor Welfare Fund Act, 1946 (22 of 1946). 4. The Rubber Act, 1947 (24 of 1947). 5. The Tea Act, 1953 (29 of 1953). 6. The Salt Cess Act, 1953 (49 of 1953). 7. The Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955). 8. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957). 9. The Sugar (Regulation of Production) Act, 1961 (55 of 1961). 10. The Textiles Committee Act, 1963 (41 of 1963). 11. The Produce Cess Act, 1966 (15 of 1966). 12. The Marine Products Export Development Authority Act, 1972 (13 of 1972). 13. The Coal Mines (Conservation and Development Act, 1974 (28 of 1974). 33
14. The Oil Industry (Development) Act, 1974 (47 of 1974). 15. The Tobacco Cess Act, 1975 (26 of 1975). 16. The Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978). 17. The Sugar Cess Act, 1982 (3 of 1982). 18. The Jute Manufactures Cess Act, 1983 (28 of 1983). 19. The Agricultural and Processed Food Products Export Cess Act, 1985 (3 of 1986). 20. The Spices Cess Act, 1986 (11 of 1986). 21. The Research and Development Cess Act, 1986 (32 of 1986). 2) Special fiscal provisions for Special Economic Zones- Chapter VI of the Special Economic Zones Act, 2005 I. Custom Duty: Every Developer and the entrepreneur is entitled to (a) Exemption from any duty of customs, under the Customs Act, 1962 or the Custom Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur- Sec 26(1)(a) of the Special Economic Zones Act,2005 (b) Exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India- Sec 26(1)(b) Points to note: 1) Exemption is available on both goods imported from SEZ and goods exported from SEZ by developer or Entrepreneur. 2) Exemption is available only for carrying authorized operation by the entrepreneur or developer. 3) Benefit is also available to contractor appointed by developer or co-developer provided all documents are in joint name of developer and Contractor Rule 10 II. Cen vat: Exemption from CENVAT and Special duty of Excise Every Developer and the entrepreneur is entitled to exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time 34
being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur Sec 26(1) (c) of the Special Economic Zones Act, 2005. Points to note: 1) Exemption is available only for carrying authorized operation by the entrepreneur or developer 2) Benefit is also available to contractor appointed by developer or co-developer provided all documents are in joint name of developer and Contractor Rule 10 of the Special Economic Zones Rules, 2006 III. Service Tax Every Developer and the entrepreneur is entitled to exemption from service tax under Chapter- V of the Finance Act, 1994 on taxable services provided to a Developer or Unit to carry on the authorized operations in a Special Economic Zone; Sec 26(1)(e) of the Special Economic Zones Act, 2005 Further, this exemption is also available to Unit under construction as per Rule 31 of the Special Economic Zones Rules, 2006 IV. Central Sales Tax Every Developer and the entrepreneur is entitled exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 if such goods are meant to carry on the authorized operations by the Developer or entrepreneur. Sec 26(1) (g) of the Special Economic Zones Act, 2005 However this is subject to the condition as per Proviso to Rule 32 of the Special Economic Zones Rules, 2006 that the dealer selling goods in the course of interstate trade or commerce to a registered dealer under the Central Sale Tax Act, 1956 shall furnish a declaration in Form I prescribed under the Central Sales Tax (Registration and Turnover) Rules, 1957. V. Securities Transaction tax Securities Transaction Tax means tax leviable on taxable securities transaction. Every Developer and the entrepreneur shall be entitled to 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 Financial Services Centre. Sec 26(1)(f) of the Special Economic Zones Act,2005 VI. Stamp duty Provision (3) to Section 3 of Indian Stamp Act, 1899 has been inserted vide Special Economic Zones Act 2005 Third Schedule Part III
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PROVIDED that no duty shall be chargeable in respect of- Any instrument executed, by, or, on behalf of, or, in favor of the Developer, or Unit or in connection with the carrying out of purposes of the Special Economic Zone. Explanation.- For the purposes of this clause, the expressions Developer, Special Economic Zone and Unit shall have meanings respectively assigned to them in clause (g), (za) and (zc) of section 2 of the Special Economic Zones Act, 2005. 3) Income Tax provisions I. Unit Sec 10 AA of Income Tax Act, 1961 provides for exemption to newly established units in Special economic zones on or after 01.04.2005. The conditions are as follows: a) Assessee should be an entrepreneur (i.e. person who has been granted approval by Development Commissioner) as per Sec 2 (j) of SEZ Act,2005 b) Unit should begin to manufacture or produce articles or things or provide any services during the PY relevant to any AY commencing on or after 01.04.2006 c) Assessee should export his goods or services by any mode-physical or otherwise
Deductions allowable: 100% of Profits from export will be available for 5 consecutive years and 50% of Profits from exports for further 5 assessment years. For eleventh to fifteenth assessment year deduction of 50% of Profits for as credited to Special Economic Zone Re-investment Reserve Account will be available. This Special reserve can be utilized for Acquiring machinery or plant within three years .Until the acquisition of the machinery or plant, the amount can be utilized for the purposes of the business of the undertaking other than For distribution by way of dividends or profits or For remittance outside India as profits or For the creation of any asset outside India
Amalgamations and demerger: Where an undertaking is transferred to another company under a scheme of amalgamation or demerger, the deduction under section 10AA shall be allowable in the hands of the 36
amalgamated or the resulting company. However, no deduction shall be admissible under this section to the amalgamating company or the demerged company for the previous year in which amalgamation or demerger takes place.
Conversion of free trade zone or export processing zone into a Special Economic Zone: In such cases, the period of ten consecutive assessment years referred to shall be reckoned from the assessment year relevant to the previous year in which the Unit began to manufacture, or produce or process such articles or things or services in such free trade zone or export processing zone. If period of ten years is completed it shall not be eligible for deduction from income. II. Developer and entrepreneur (a) Exemption to developer of Special Economic Zones will be available under Sec 80- IAB of the Income Tax Act in respect of developers of SEZ notified on or after 01.04.2005 Deductions allowable: A deduction of an amount equal to 100% of the profits and gains derived from such business for 10 consecutive assessment years will be available. The assessee has the option of claiming the said deduction for any 10 consecutive assessment years out of 15 years beginning from the year in which a SEZ has been notified by the Central Government Transfer of undertaking: If a taxpayer who develops a special economic zone on or after April 1, 2005 (transferor) transfers the operation/maintenance of such zone to another developer (transferee), then deduction shall be allowed to the transferee for the remaining period of 10 years as if the operation and maintenance were not so transferred. Audit report: Accounts of the undertaking for the Previous year relevant to the Assessment yeat for which the deduction is claimed must have been audited, and the assessee must furnish, along with his return of income, the report of such audit in the prescribed form Form 10 CCB duly signed and verified by the accountant b) Exemption from Dividend distribution tax Sec 111-O (6) provides that No tax on dividends would be chargeable in respect of the total income of an undertaking or enterprise engaged in (i) Developing a SEZ or (ii) Developing and operating a SEZ or 37
(iii) Developing, operating and maintaining a SEZ IF such dividend (whether interim or otherwise) is declared, distributed or paid by such Developer or enterprise, on or after the 1st day of April, 2005 out of its current income Further, there will be no tax either in the hands of the Developer or enterprise or person receiving such dividend III. Exemption of capital gains from transfer of capital assets The exemption is available to all categories of assesses on capital gain arising on the transfer of certain capital asset of industrial undertaking from urban area to SEZ. (Whether developed in an urban area or not) under Sec 54 GA of the Income Tax Act, 1961. Conditions: The Asset transferred should be machinery or plant or building or land or any rights in building or land. The capital gain should be utilized within one year before or three years after the date of transfer for the specified purpose. The amount of capital gain which is not so utilised for the specific purposes should be deposited in an account with any specified bank or institution and utilised in accordance with the scheme notified by the Central Government Exemption: The amount of exemption will be equal to a) Amount of capital gains in shifting or b) cost and expenses incurred in shifting etc. whichever is lower. IV. Income of a non-resident a) Interest received on a deposit made on or after the 1st day of April, 2005, in an Offshore Banking Unit by 1. Nonresident or 2. A person who is not ordinarily resident in India Is exempt under (Section 10(15) (viii))
b) Offshore Banking Unit is not required to make any tax deduction from the interest paid (a) On deposit made on or after the 1st day of April, 2005, by a non-resident or a person not ordinarily resident in India; or (b) On borrowing, on or after the 1st day of April, 2005, from a non-resident or a person not ordinarily resident in India. (Sec 197 A (ID))
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V. Offshore banking unit and International Financial Service center Sec 80 LA of the Income Tax Act, 1961 provides for full exemption from income to offshore banking unit and unit in International Financial service centre for first five years and 50 % exemption in subsequent five years. The income includes the following incomes: (a) From an Offshore Banking Unit in a Special Economic Zone; or (b) From the business referred to in sub-section (1) of section 6 of the Banking Regulation Act, 1949 (10 of 1949) with an undertaking located in a Special Economic Zone or any other undertaking which develops, develops and operates or develops, operates and maintains a Special Economic Zone; or (c) From any Unit of the International Financial Services Centre from its business for which it has been approved for setting up in such a Centre in a Special Economic Zone. Conditions: a) A report from a Chartered Accountant in Form No. 10CCF certifying that the deduction has been correctly claimed in accordance with the provisions of this section should be submitted along with the return of income. b) A copy of permission obtained under section 23(1)(a) of Banking Regulation Act should be submitted along with the return of income VI. Industrial park scheme The Central Government framed the scheme for industrial parks,-Industrial Park Scheme, 2002 in exercise of the powers conferred by clause (iii) of sub-section (4) of section 80 IA of the Income-tax Act, 1961 (43 of 1961) This scheme was applicable for any undertaking which develops, develops and operates or maintains and operates an Industrial Park for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006.However this has been extended up to 31.03.2009 by the Finance Act,2006. Any undertaking which develops, operates or maintains an industrial park as notified in this scheme will be eligible for a deduction of 100 % profits derived from such business for ten consecutive years. The deduction can be claimed by the assessee for any ten consecutive years out of fifteen years beginning from the year in which the undertaking develops/operates/maintains the Industrial park. VII. Investors in SEZ Exemption is provided to investors in special economic Zones under Sec 10 (23G) of the Income Tax Act, 1961. Incomes not included in total income 39
10(23G) any income by way of dividends [, other than dividends referred to in section 115-O], interest or long-term capital gains of an infrastructure capital fund or an infrastructure capital company [or a co-operative bank] from investments made on or after the 1 st day of June, 1998 by way of shares or long-term finance in [any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (3) of section 80-IAB] or a housing project referred to in subsection (10) of section 80-IB] [or a hotel project or a hospital project] and which has been approved by the Central Government on an application made by it in accordance with the rules made in this behalf and which satisfies the prescribed conditions : [Provided that the income, by way of dividends, other than dividends referred to in section 115- O, interest or long-term capital gains of an infrastructure capital company, shall be taken into account in computing the book profit and income-tax payable under section 115JB.] VIII. Undertaking developing and building housing projects Sec 80- IB (10) - Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, (a) Such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction, (i) In a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) In a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. (b) The project is on the size of a plot of land which has a minimum area of one acre: (c) The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d) The built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.] IX. Newly established undertakings in free trade Zones A deduction of such profit and gains as are derived by an undertaking from the export of article or thing or computer software shall be allowed from total income of assessee. 40
Essential Conditions: (i) It should begin manufacturing or producing articles/things or computer software during previous year (a) Assessment Year 1981-1982 or thereafter in any free trade zone. (b) 1993-94 or thereafter in any EHTP or STP (c) 2000-01 or thereafter in any special Economic Zone (ii) It should not be formed by splitting up or reconstruction of an existing business. (iii) It should not be formed by transfer of machinery or plant, previously used for any purpose to new business. (iv)The sale proceeds of the article or thing should be brought into India by assessee in convertible foreign Exchange within 6month from the end of previous year. Period of Tax Holiday: The profits and gain will not be included in the total income of the assessee in respect of any 10 consecutive assessment years beginning with the year in which undertaking begins to manufacture ,produce article or thing or computer software Section 10A (1A) Units established in special Economic Zone on or after 1.4.2002 : 1) A deduction of 100% of profit and gains from such business from the total income for first 5 assessment years. 2) Thereafter 50% of such profits and gains for next 2 yrs. 3) Deduction beyond 7 year mentioned above for next 3 years can be claimed if certain conditions satisfied. Consequent to insertion of new section 10AA providing for a tax holiday in respect of newly established Units in SEZ, sub-section (7B) has been inserted in section 10A, The provisions of this section shall not apply to any undertaking, being a Unit referred to in clause (zc) of section 2 of the Special Economic Zones Act, 2005, which has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone. X. Newly established 100 % export oriented units Special provisions in respect of newly established hundred per cent export-oriented undertakings- Sec 10 B Salient Provisions of Sec 10 B 41
a) A deduction of profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assesse. b) Where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years. c) For the assessment year beginning on the 1st day of April, 2003, the deduction under this subsection shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software: d) No deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years e) No deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139. f) This section applies to any undertaking which fulfills all the following conditions, namely: (i) It manufactures or produces any articles or things or computer software; (ii) It is not formed by the splitting up, or the reconstruction, of a business already in (iii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose. g) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. h) The profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking i) The deduction under sub-section (1) shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form (Form No. 56 G) along with the return of income, the report of an accountant, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
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4) Other related provisions I. Environment clearances SEZ units are required to obtain no objection certificates from the State Pollution Control Board. Environmental Impact Assessment is required for 30 notified industries such as petroleum refineries, chemical fertilizers, pesticides, petro-chemical complexes, bulk drugs and pharmaceuticals, oil exploration, synthetic rubber, distilleries, raw skins and hides, dyes, cement, foundries, electro plating etc. In such cases clearance from the Ministry of Environment and Forest are required. However, the requirement of public hearing in such cases has been exempted for the units in SEZ. II. Labor policy Although Normal labor laws of the land apply to the units in Special Economic Zones., the respective State Governments may delegate the power of the Labor Commissioner to the Development Commissioner of SEZ and declare the Zone as public utilities. III. Drugs, Pharmaceuticals & Narcotics SEZ units have been exempted from the requirements of Import licence, import registration and import through notified ports in respect to drugs and cosmetics under Drugs and Cosmetics Rules, 1945 vide Dept. of Health Notification GSR 528(E) dated 8.7.2003 . IV. Textile policy SEZ units engaged in export of Cotton Waste and import of Cotton are not required to register with the office of Textile Commissioner V. Companies Act Schedule XIII of the Companies Act, 1956 contains two Parts Part I Conditions relating to appointment of managing or whole time director or a manager without approval of Central Government Part II Remuneration Payable by companies having Profits / No Profits /Inadequate Profit Changes have made in both of them for Special Economic Zone A) There are no restrictions on appointment of non-resident as Managing Director/Whole time Director. He should have a proper employment visa from Indian Mission abroad and should furnish details of company, principal employer and terms of appointment along with visa application. (Notification No GSR 670(E) dated 30-09-2002 Resident in India includes a person who has been staying in India for a continuous period of not less than 12 months immediately preceding the date of employment as a managerial person and who has come to stay in India 43
(i)For taking up employment in India (ii)For carrying on a business or vocation in India B) Managerial Remuneration under Companies Act 1956- In Schedule XIII Part II section II of Companies Act, 1956 there are maximum Limits for Maximum managerial remuneration in case of companies having no profit or inadequate profit depending on effective capital of the company with prior approval of Central government Maximum Limit is Rs.4, 00,000 p.m. for companies Restriction in respect of managerial remuneration under companies Act has been relaxed in case of companies in SEZ. The remuneration can be up to Rs. 20 lakhs per month (Rs. 2.40 crores per annum) without approval of central Government. The relaxation is applicable if: (a) The company has not raised any money by public issue of shares or debentures in India. (b) The company has not made any default in India in repayment of any of its debts (Including public deposits) or debentures or interest payable thereon for continuous period of 30 days in any financial year (Notification No GSR 565(E) dated 14-08-2002) VI. FEMA a) FDI -100% FDI is allowed through automatic route for all manufacturing activities in SEZ except i) Arms and ammunition, Explosives and allied items of defense equipments, Defense aircrafts and warships ii) Atomic substances, Narcotics and Psychotropic Substances and hazardous Chemicals iii) Distillation and brewing of Alcoholic drinks and iv) Cigarette/cigars and manufactured tobacco substitutes. b) Articles reserved for SSI SEZ Unit can manufacture articles reserved for SSI even if foreign equity exceeds 24%.No License is required (Department of Industrial License Press Note No 5 dated 29-03-2000 Notification 7(11)/2000-IP dated 04-12-2000) c) No limit for receipts of export proceeds No Time Limit for export of export proceeds which is normally 6 months for others (Foreign Exchange Management (Export of Goods and Services) Regulation 2000)
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d) Branch /Office /Unit in SEZ by person resident outside India Branch office may be set up in SEZ to undertake manufacturing and service activities without permission of RBI in those sectors where 100% FDI is permitted Such unit should function on standalone basis i.e. it should be isolated and restricted to SEZ and it should not carry on business outside SEZ. (Foreign Exchange Management (Establishment in India of Branch or other place of businesses) Regulation 2000) e) DTA units can pay for goods in Foreign Exchange for which goods are supplied by SEZ to DTA RBI Circular 8/2005-06 dated 01/07/2005 f) Netting off by SEZ unit- In some cases, SEZ unit may have transactions of import and also export with the same foreign customer .In such case, exporter can net off export receivables against import payments. The transactions should be between same two properties and there should be proper documentation. This permission is only for SEZ units. (RBI Circular 8/2005-06 dated 01/07/2005) g) Foreign Exchange Derivative Contracts A Unit in SEZ can enter into contract in commodity exchange or market outside India to hedge the price risk in the commodity on export/import without prior approval of RBI (Foreign Exchange Derivative Contracts) Regulation, 2000 i) External commercial Borrowings (ECB) by SEZ SEZ can raise ECB for its own requirements and borrowed funds shall not be transferred to its sister concern or any other Unit in DTA (RBI Circular 2/2005-06 dated 01/07/2005) j) Direct dispatch of Documents to Foreign Buyer SEZ Units can dispatch export documents direct to consignee outside India. These need not be routed through authorized dealer Remittance should be obtained and GR/SDF form should be submitted to authorized dealer within 21 days for monitoring RBI Circular 8/2005-06 dated 01/07/2005 k) Job Work abroad SEZ Units can undertake Job work abroad and export goods from that country itself Exporter has to make satisfactory arrangement for realization of full exports proceeds (RBI Circular 8/2005-06 dated 01/07/2005) (l) Payment to SEZ by DTA unit in Foreign Exchange 45
An EOU/SEZ/STP/EHTP/BTP may supply goods to unit in DTA. In such case the DTA unit can pay for the goods in foreign exchange, for which foreign exchange can be released by authorized dealers (RBI Circular 8/2005-06 dated 01/07/2005 (m) Foreign Currency Account A unit located in SEZ can hold, open and maintain a Foreign Currency Account with authorized dealer in India. All Foreign Exchange Funds received by SEZ are credited to this account. However, Foreign exchange purchased in India against Rupees cannot be credited to this account without permission of RBI .the funds in the account can be used for any bona fide trade transactions with person resident in India or otherwise. The balances in the account are exempt from all restrictions in respect of current account transactions. Restrictions on EEFC account in respect of current account transactions are not applicable to SEZ accounts, except that gifts exceeding US $ 5,000 and donations exceeding US $ 10,000 per remitter/donor per annum are not permitted. Funds in these accounts shall not be lent or made available to any person or entity resident in India, except to another SEZ unit. (Regulation 6A of FEMA (Foreign Currency accounts by a person resident in India) Regulations , 2000 and RBI Circular 8/2005-6 dated 01/07/2005) VII. Amendments in Insurance Act A proviso has been added in Sec 2C (1) after the third proviso by the Third Schedule- Part I of the Special Economic Zones Act, 2005 and a new Sec 2 CA has been inserted. Accordingly, an insurance company can carry on insurance business in special economic zone and the Central Government has the power to apply provisions of this Act to Special Economic Zones. VIII. Amendments in Banking Regulation Act Power to exempt in certain cases S 53 provides that The Central Government may, on the recommendation of the Reserve Bank, declare, by notification in the Official Gazette, that any or all of the provisions of this Act shall not apply to any banking company or institution or to any class of banking companies or any of their branches functioning or located in any Special Economic Zone established under the Special Economic Zones Act, 2005. A copy of every such notification shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by the both the Houses. 46
ABOUT NOIDA SPECIAL ECONOMIC ZONE NSEZ the only Central Government SEZ in the northern India, headed by the Development Commissioner, was set up in 1985 in Noida Phase-II on a 310 acre plot of land. Government of India has so far invested a sum of Rs. 1177 million on its development. NSEZ provides excellent infrastructure, supportive services and sector specific facilities for the thrust areas of exports like gem and jewellery and electronics software. This is the only land locked SEZ , contrary to other zones which are situated in Port Towns and hence emphasis of type of units to be set up are those with high value and low volume. Proximity to Delhi and availability of skilled and dedicated manpower makes it ideal for setting up jewellery and software development units. These two sectors have contributed more than 30 per cent of the export turn over during the year 2008-09. NSEZ has maintained high export growth rate for the past many years. Exports had increased from Rs. 42660 million in 2004-05 to Rs. 163080 million during 2008-09. Employment in the zone has gone up from 16284 in December, 2001 to 32550 in June, 2009. During the same period, number of operational units in the zone has increased from 141 to 245. Besides, one hundred units are under active implementation. Besides, the jurisdiction of Noida Special Economic Zone is spread over EOUs in nine states namely Jammu & Kashmir, Himachal Pradesh, Punjab, Haryana, Rajasthan, Delhi, Uttar Pradesh, Uttaranchal and Union Territory of Chandigarh. Exports from EOUs in the jurisdiction of NSEZ in Northern India have increased from Rs. 86155 million in 2005-06 to Rs. 108480 million in 2008- 2009. NSEZ has 343 developed plots of varying sizes, besides eleven standard design factory complexes that can accommodate one hundred seventy six unit meters. One SDF block of sixteen units is also under construction. Future expansion has been strategically planned and when implemented fully, the zone would be able to provide 224 SDF units. Infrastructure, supportive services and trade related facilities have been substantially upgraded during the last few years. NSEZ offers access to global telecommunication network, uninterrupted power supply and efficient local transport system. A high capacity telephone exchange has been installed in the Zone. An independent feeder line has since been provided for uninterrupted power supply. The reliability and quality of power supply has improved with the commissioning of 132 KVA sub station near NSEZ. Proximity to Delhi provides easy access to financial and commercial infrastructure of the capital. Customs Wing ensures prompt and on the spot clearances of export/import consignments. Besides, duty free oil depot, in-house post and telegraph office, sub- foreign post office, insurance and banking including ATM facilities, courier service facilities, industrial canteens and executive restaurant and travel/customs forwarding agencies have been provided. An extension counter of Punjab National Bank to collect central excise and customs duties has become operational. A solar energy based power plant is also proposed to be set up in NSEZ. Road from Noida to Dadri has been widened by NOIDA into a six lane highway. Housing is not a problem as large numbers of residential colonies have been developed in Noida. 49
Sector specific Infrastructure for software and gems & jewellery units has been developed. Satellite data link facilitates software exports. Earth station in Noida and the available VSNL outfit have further supplemented this facility. Highly trained and qualified manpower for software development is available in and around Delhi. A campus like environment, conducive for quiet and creative work prevails in the zone. Supportive infrastructure and easy availability of manpower make NSEZ an ideal location for setting up software units. Software units are allotted built-up space on priority. Two exclusive complexes have been developed for jewellery units. MMTC has a full-fledged office in NSEZ for supply of gold which also provides packing credit facilities. Central Warehousing Corporation provides facilitation for handling and storage of jewellery cargo and services for completion of export formalities such as appraisement, processing of airway bills and transportation to the Airport. Sub- foreign post office facilitates export/import of jewellery samples. Besides, Trading Block consisting of 16 SDF units of 100 meters each is existed in NSEZ. NSEZ provides Pre-establishment support in obtaining clearances/approvals from various statutory authorities. NSEZs developed infrastructure, procedural ease and supportive services are its main attractions. NSEZ has been declared as a 'Port of Import & Export' on the lines of Inland Container Depot ICD and EDI on online filing facilities of application will be operational soon. The service center at NSEZ provides excellent facility for banking, insurance, sub-foreign post office, telephone etc. Cleanliness and sanitation of zone in accorded on top priority and dedicated staff of the NSEZ is always to extend their helping hand for overall growth and development of exports.
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OFFICE BEARERS OF NSEZ
BANKS AND RESTAURANTS IN NSEZ
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PROCEDURE FOR SETTING UP A UNIT IN NOIDA SEZ For setting up a unit in special Economic Zone, the applicant has to apply in form-F given in SEZ Rules, 2006 along with the following documents: (Form-F may be down loaded from our web site: NSEZ.GOV.IN) i. A DD amounting to Rs. 5000/- in favor of Pay & Accounts Officer, Ministry of Commerce & Industry, Department of commerce payable at New Delhi. ii. Complete project report giving therein promoters bio-data, manufacturing process/ Flow chart, cost of the project, means of financing List of CG/RM iii. Copy of Memorandum & Articles of association in case of. Company. iv. Copy of registered partnership deed in case of partnership firm. v. Copies of passport, PAN and IT return for last three years in respect of directors/partners/ proprietor as the case may be. vi. Copies of balance sheet for last three years in case of Pvt. Ltd Company or Public Ltd. Company. vii. Copy of Buy-back agreement/marketing tie up. viii. Copy of Import-Export code, if already obtained from O/0 the Jt. DGFT. ix. Requirement of space for the proposed project. x. Form F in triplicate duly filled up xi. Affidavit as per form F The Approval Committee will consider the proposal and approve. After approval, the unit is issued Letter of approval (LOA). On receipt of the LOA, the unit has to accept the terms and conditions of the LOA in terms of condition number (Xii) of LOA and also has to apply for allotment of plot/SDF, for implementation of the project. On completing the formalities of allotment of plot/SDF, the unit has to execute Bond cum legal undertaking in form H of SEZ Rules on a non-judicial stamp paper of Rs. 100/- bought in the UP or state where the unit is located and notarized by a Notary public registered in the concerned State. After acceptance of the Bond cum Legal undertaking, the unit has to apply for issuance of import-Export code number in the format as given in Ayaat Niryat form along with following documents: i. D.D. for Rs. 250/- as application fee. ii. Bankers certificate regarding maintenance of current account. iii. Two passport size photographs. iv. Copy of PAN of the company. For issuance of RCMC, the unit has to submit application in App. 19 of Handbook of procedures Vol- I along with the following documents: i. Copy of IEC issued to the company. ii. Bankers certificate regarding financial soundness of the applicant.
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In addition to above, the unit has to submit following applications with State government/departments: i. NOC from pollution Control Board ii. Power connection from UPPCL iii. Building plan form the O/o the DC iv. Trade TAX registration from Commercial Tax Deptt. UP The Development commissioner, Noida SEZ has been delegated the powers of Labor Commissioner by the government of Uttar Pradesh to resolve Labor disputes and issue licenses under Factory Act/ Contract Labor (R& A) Act/ Shop & Commercial establishment Act. Mode of Payment of lease rent @ Rs. 70/- per sqr. mtrs. per annum in case of plot & Rs. 1095/- per sqr. mtrs. in case of SDF ( Built up space) Three month advance payment + one year B.G. through DD in favor of DC, Noida SEZ. Water charges & mode of payment Rs. 1000/- per quarter for one SDF and Rs. 175/- to 500/- for plot depending upon the size of plot.
HOW TO APPLY FOR EOU SETUP For setting up a unit in an EOU, three copies of the application in the form given in Appendix- 14I-A of the Handbook (Vol.1) may be submitted to the Development Commissioner (DC) of the EOU concerned. Proposals for setting up units in EOU other than those requiring industrial License may be granted approval by the Unit Approval Committee under the chairmanship of the Development Commissioner within 15 days. Proposals for setting up units in EOU requiring Industrial License may be granted approval by the Development Commissioner after clearance of the proposal by the EOU Board of Approval and Department of Industrial Policy and Promotion within 45 days. Letter of permission (LOP)/Letter of Intent (LOI) issued to EOU units by the Development Commissioner would be construed as a license for all purposes, including for procurement of raw material and consumables either directly or through canalising agency. The LOP/LOI shall specify the items of manufacture/service activity, annual capacity, projected annual export for the first years in dollar terms, Net Foreign Exchange Earnings (NFE), limitations, if any, regarding sale of finished goods, by products and rejects in the DTA and such other matter as may be necessary and also impose such conditions as may be required.
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Basic Requirements for setting up an EOU (Check-list) 1. Planning your venture: i) Is it on your own ii) With foreign participation and nature of participation (foreign investment allowed 100%) 2) What product do you intend to manufacture i) Product/By-product ii) Does it requires clearance from Central/State Government authorities iii)Is it an SSI Unit. If so, registration is required as an SSI 3) Technology to be used i) Indigenous/foreign ii)Related costs and conditions
4) Feasibility report i) On your own or with help of consultant
5) The finances involved i)Land, structure, buildings etc (Please note, building construction material is not exempted from duty) ii) Capital goods, machinery etc iii) Payment for royalties etc. iv) Administration and establishment v) Others: like interest on loans, related taxes and levies etc.
6) The current competition overseas i) Main competitors ii) Demand and price-levels.
7) The import laws and other requirements in target markets i) Any fiscal/non-fiscal barriers, like anti-dumping laws ii) Quota restrictions iii) Preferential treatment to competitor countries
8) Location of the unit i) Whether it is located close to a port or railroad ii) Availability of raw materials iii) Manpower availability iv) Environment clearance needed if unit is located 25 kms from an urban town
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9) Capital goods, machinery and equipment to be used i) Indigenous or foreign ii) Related costs
10) The raw materials and other inputs, like consumables etc that would be required: i) Source ii) Cost iii) Monthly, quarterly and annual requirements
11) Effluents or waste-material i) How do you propose to treat these or discharge them?
12) The production process and the related inputs i) Whether production process requires air-conditioning plants, special furnaces or kilns etc. ii) Details and costs (Please note, air-conditioning equipment permitted duty free only if it is essential for production process).
13) The production capacity and spare capacity: i) Do you intend to utilise the same by doing sub-contracting work for other export units in ii) DTA or Export Oriented Unit (EOU)/Export Processing Zone (SEZ ) units. iii) Details of sub-contractors iv) Related costs
14) Any by-products turned out in the production process i) Details of by-products ii) Whether these would be exported or sold in Domestic Tariff Area (DTA)
15) Packaging i) Details of packaging ii) Source iii) Cost
16) Power i) Whether the normal grid could supply adequate power ii) Whether there would be need for a captive power plant iii) Cost of power plant iv) Fuel that would be required for captive power plant (e.g. furnace oil, LPG, coal etc.).
17) Duties, taxes and fiscal levies both, Central and State-level i) Customs and Excise levies ii) Sales tax, Octroi etc iii) Power tariffs and duties
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18) Other information i) The company should be registered ii) A current account with a bank authorised to deal in foreign exchange should be opened. iii) Registration-Cum-Membership Certificate (RCMC) should be obtained from the office of the concerned Development Commissioner. iv) Sales tax registration be obtained from the Sales Tax Department
19) Mandatory clearances from State Government's i) Pollution clearance certificate ii) Approval of building plan in cases where building is proposed to be constructed. iii) Registration as a small scale industrial unit, if applicable iv) Registration under Factories Act
JURISDICTION OF DEVELOPMENT COMMISSIONER OF SEZ /EOU
JURISDICTION OF DC's Noida Special Economic Zone Noida Dadri Road, Phase-II, Noida-201305, Distt. Ghaziabad Uttar Pradesh - 201305
Tel: 0120-2567270 to 73 Fax: 0120-2562314/7276 Email: dc@nsez.gov.in Website: http://www.nsez.gov.in/nsezwebsite/
Employment: Total Employment : 32550 as on 30/06/09 Men : 20957 Women : 11593
Units in production as on date : 245 Export projections for the year 2009-2010 : Rs. 10,000 crores U.P. Special Economic Zone (Amended) Policy- 2007
Part - 'A'
Fiscal Incentives / Facilities, Rationalisation of Procedures
The Section50 oI Central SEZ Act, 2005, expects that the State Governments should also notiIy Policies and enabling Act to provide Iacilities/exemptions to SEZs.
AIter studying the Central SEZ Act - 2005, SEZ Rules - 2006, and also relevant Policies oI various States, new U.P. SEZ Policy is being hereby notiIied, in order to Ioster the industrial and economic development and creating conducing environment Ior the development oI SEZ.
To encourage development oI SEZs in the State and make available all the necessary Iacilities, this Policy is hereby, being notiIied, as Iollows :
2. SALIENT FEATURES OF SEZs :
i. Integrated Areas with the world-class inIrastructure Iacilities will be developed through establishment oI SEZ.
ii. Apart Irom achieving a rapid economic & industrial growth in the Country and the State, new avenues Ior employment generation will be created by the setting up oI SEZs. ThereIore, SEZs have a vital role to play to Ioster the economic development, in the Country & the State.
iii. The Exports will be boosted by the establishment oI SEZs. Domestic investments , FDI and Ioreign & modern technology will be attracted.
iv. Provisions Ior the exemption oI taxes etc., Ior rationalisation/exemption in the legal provisions related to labour, environment, electricity etc. has been provided Ior in this Policy.
3. POLICY FOR STATE LEVEL EXEMPTIONS/ FACILITIES/ RATIONALISATION
(1) Policy related to Exemptions of State Level Taxes, Levies, Cess, Fee, and Duties etc. (Following exemptions shall be applicable Irom the date oI issuance oI NotiIication, by the concerned deptt.)
1. SEZ Developer and SEZ units shall be exempt Irom all kinds oI taxes, cess or levies oI the Government oI Uttar Pradesh or taxes oI any other local authority/ agency Ior any transactions within the SEZ or on any 57
procurement oI goods, supplies or services Irom the Domestic TariII Area. Units in DTA would also be exempt Irom these on sales made by them to a SEZs unit or SEZ developer. These include UP Trade Tax, Turnover Tax, Mandi Tax, Entry Tax, Development Tax, Local Bodies Tax etc.
2. SEZ Developer and Units would also be exempt Irom taxes levied by local bodies, as SEZs would be an industrial township under constitution oI India and would be responsible Ior providing services within the Zone.
3. Developers, Co-developers oI SEZs and Units established/to be established will get total exemption Irom the Stamp-duty & Registration-Fee on Iirst transaction but on implementation oI amendments in the Indian Stamp Act-1899, as per 3 rd schedule oI SEZ Act-2005, exemption will be applicable as provided therein.
EXPLANATION : (A) "Policy related to Exemptions oI State Level Taxes, Levies, Cess, Fee, and Duties etc., it was proposed by the Tax & Registration Deptt. regarding sub-point 1, 2 & 3 oI the above Para 3(1) that according to the decision taken by the Empowered Committee oI State Finance Ministers in the meetings dated 05.05.2007 and 15.06.2007, all the exemptions in State level taxes, levy, Iee and duties (including stamp duty) shall be applicable only in the processing area oI SEZ ".
"In this regard, in principle consent oI the Government oI U.P. can be expressed and Government oI India may be requested to implement this. But till such time Government oI India takes a decision in this regard, it shall not be appropriate to make any amendment by the Government oI U.P. on this point in the SEZ Policy as this might result in pushing U.P. behind other States in the competition. It shall be proper to continue the existing Policy in U.P. regarding the above exemptions provided by Government oI India in the whole SEZ until the Government oI India makes the provision in this regard. Exemption in Stamp Duty shall be applicable on Iirst transIer only". (B) Registration-Fee on the Vehicles shall be payable. Permanent/temporary registration will be mandatory as required and under the Rule33 oI concerned Rules, trade-certiIicate shall have to be procured on payment oI applicable Iees. Passenger/Goods Carriers, which will operate within the SEZ only and in no case, will move out oI SEZ, will be exempt Irom the Tax & Additional Tax whereas other types oI vehicle shall not be eligible Ior the same.
(C) There is no provision oI exemption on the Royalty on Minerals.
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(2) Policy related to Electricity
1. Electricity Duty and taxes shall be exempted on generated or purchased electricity Ior use in processing area oI the SEZ Ior a period oI 10 years Irom the date oI production or start oI service.
2. SEZ will have Ireedom oI generation, transmission and distribution oI electricity within the SEZ subject to provision oI Electricity Act 2003. Wherever the consent oI U.P. State Regulatory Commission will be required, same shall be obtained.
3. Under the U.P. Power Policy all admissible Iacilities shall be available to SEZs also.
(3) Rationalising Labour Laws
1. Powers oI Labour Commissioner related to implementation oI labour laws will be delegated to the Development Commissioner oI SEZ and nominated OIIicers oI Labour Deptt. will be posted in the concerned SEZ.
2. In order to provide Single Window Service under the labour laws in the SEZ, a system oI making the services oI oIIicers oI Labour Deptt. available at the disposal oI Development Commissioner, will be developed.
3. For inspections relating to workers' health and saIety, Government oI Uttar Pradesh will use best international practices by permitting units to get such inspections done through such accredited agencies (outside Labout Deptt.) as may be notiIied by the Government. Under the Factories Act 1948 and Environment Conservation Act 1985, eIIorts will be made by the Labour Deptt, Govt. oI U.P. to allow inspection by outside accredited agencies with the permission oI Government oI India in SaIety Management System oI hazardous goods required as per Central Acts.
4. Units located in the SEZ will be endowed with public utility status under the Industrial Dispute Act.
5. GoUP would notiIy a single reporting Iormat covering all the Labour Laws. Labour department will make eIIorts to Iurther rationalise/simpliIy the existing Single Format.
(4) Policy related to Inspection
1. For all physical inspections, a schedule would be workedout in consultation with the Development Commissioner and then only inspections would be carriedout. 59
2. In case oI any speciIic inIormation oI any violation, the inspecting agency will be required to take prior approval oI the Development Commissioner beIore conducting the proposed inspection.
EXPLANATION :
Appropriate arrangements Ior monitoring oI manuIacturing process under the jurisdiction oI Excise Department will be made within the rules.
1. In respect oI all State level clearances will be given at a single point. All concerned departments oI State government will make arrangements, issue instructions/guidelines Ior issuing these clearances through a single point i.e. Development Commissioner or through a Committee constituted under the Development Commissioner.
2. A Committee will constituted under the Development Commissioner oI each SEZ and representatives oI diIIerent departments/ specialists will be included in the Committee. This Committee will have all the authority to issue clearances related to State government and also Iacilitate the clearances related to Central government and will ensure that time bound clearances to all departments are issued within a Iixed time period Irom the date oI receipt oI application Irom the units.
3. Under the Section 14 (G) oI SEZ Act 2005 all the concerned departments Ior the purpose oI approvals will delegate their powers / work allocation to approval Committee to be constituted under the Section 13 oI SEZ Act-2005.
4. Most oI the State level clearances shall be brought under automatic clearance route, meaning thereby that ex-post-Iacto inIormation by the developer or unit entrepreneur shall be suIIicient.
5. For all clearances required Irom State government agencies, GoUP shall notiIy a single Iorm oI application and Letter oI Permission issued by the Development Commissioner shall contain approvals oI subjects covered by the application Iorm.
EXPLANATION Clearances etc. Ior establishing units under the jurisdiction oI the Excise Deptt. shall not be covered by above-said system.
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(6) Rationalization of Environmental Procedures
1. A list oI non-polluting industries will be notiIied Ior which separate environmental NOC will not be required in SEZ. For the remaining industries and matters, where delegation oI powers is possible legally, these Powers will be delegated to Regional OIIicer oI U.P. Pollution Control Board/ OIIicers oI UPPCB posted in SEZ. Procedure prescribed in the relevant acts / rules will be Iollowed.
2. State Govt. will take necessary steps to stop the un-planned development around the SEZs and best possible shall consider developing green belt.
3. A system oI periodic selI certiIication Ior all industries in the SEZ, assisted by private certiIication agencies will be implemented. Development Commissioner will be authorised to supervise & monitor these through a mechanism random sampling oI units.
4. As per the list provided in the notiIication issued by the Ministry oI Environment oI Government oI India (list oI projects or activities requiring prior Environmental Clearance under E.I.A. NotiIication No. S.O. 1533 dated 14.09.2006) dated 14.09.2006, regarding industries/projects/EPZ/SEZ etc., a system has been put in place Ior environmental clearance.
(7) Policy related to the developmental structure and other commitments of the State Government for SEZs.
1. SEZs shall be established in the public sector, private sector and through PPP route.
2. Government oI U.P. will declare SEZs as industrial townships, as provided under article 243 (Q), oI the Constitution.
3. SEZs shall be provisioned as a special area in the local master plan. SuIIicient Ilexibility shall be available to the Developer, within the broad parameters oI zoning regulations and applicable land use.
4. State Government shall act as a Iacilitator Ior ensuring the availability oI water to the developer and units.
(8) An empowered Committee shall be constituted under the Chairmanship oI ChieI Secretary, GoUP, Ior taking the actions required by the State Govt. under the SEZ Act 2005 and Rules 2006 oI Govt. oI India, wherein Principal Secretary/ Secretary and other related oIIicers oI concerned departments shall be included as Members. OIIicers and Developers oI SEZs shall also be invited as and when required. 61
Powers and functions of above mentioned Empowered Committee shall be as follows :
1. To examine and recommend to Govt. oI India under section 3 oI SEZ Act - 2005, the proposals received Ior all SEZs (including private sector proposals received till now) as per SEZ Act & Rules and UPSEZ Policy.
2. All other works to be allocated by the state Govt. Ior the establishment and implementation oI the SEZs.
3. To make necessary arrangements Ior the redressal oI problems coming in the way oI rapid & eIIective implementation oI any SEZ.
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U.P. Special Economic Zone (Amended) Policy - 2007 Part - 'B'
Selection of Developer, Allotment of Land and Arrangement of Master Plan Land Use etc.
1. APPLICABILITY/ EFFECT AND LAND ARRANGEMENT
1.1 Applicability/ Effect: Paragraphs 2, 3, 4 & 5 relating to the selection oI developer and allotment oI land will be applicable to such SEZs which will be implemented on PPP model. ThereIore, SEZs to be implemented in the public sector or private sector shall not be governed by these points. These points will be applicable on those cases oI private sector where land will be demanded Irom the Government/ Government Agency, as well. Facilities stated under para 6, 7 & 8 will be applicable on all the SEZs to be established in the State.
1.2 Land Arrangement: In view oI the Policy decided by Government oI India in their letter dated 15.06.2007 regarding acquisition oI land Ior establishment oI SEZ "Policy related to non-sanction oI SEZ on compulsory land acquisition land" compulsory land acquisition shall not be done by Government oI U.P. Ior establishment oI SEZ. Rather, private developers shall arrange/purchase the land on their own Ior establishment oI SEZ. In Iuture, whatever Policy shall be decided by the Government oI India Ior land acquisition Ior SEZ, the same shall automatically be adopted by the Government oI U.P. and necessary action shall be taken accordingly. II an SEZ is to be established on Public Private Partnership (PPP) basis, then the selection oI private partner shall be according to the guidelines decided by the Government. II Government/ Govt. Institute desires to establish an SEZ on its own or through a joint venture, then it shall arrange Ior the land under its prevailing rules.
2. PUBLIC NOTIFICATION AND RECEIPT OF PROPOSALS
2.1 In order to promote establishment oI SEZs, Nodal Agency indicated under para 3.3 oI this Policy will issue public notice Ior consideration on proposals received. 63
2.2 As per this Policy, proposals received under bid process (PPP process) shall be received by the Nodal Agency and they shall be considered. All the proposals shall be considered under bid process (PPP process). II SEZ is to be established on the basis oI Public Private Partnership (PPP) then the selection oI private partner shall be according to the guidelines decided by the Govt. Ior Public Private Partnership (PPP) projects. First oI all, Nodal agency will immediately consider that proposal received is worth planning or not. II decision is in negative then entire application Iee shall be reIunded and iI it is positive then immediate detailed consideration/ examination will be done under this policy.
3. SELECTION OF DEVELOPER
3.1 Selection oI Developer shall be undertaken under Public Private Partnership (PPP) process oI the Government on the basis oI bid process.
3.2 SEZs to be developed shall be divided into Iollowing three categories on the basis oI area:-
Category - A` - NotiIied area oI Noida/ Greater Noida Category - B` - NotiIied areas oI other development authorities oI the State (including Industrial Development Authorities) Category - 'C' - Remaining areas oI the State.
3.3 The concerned Industrial Development Authority (Noida/ Greater Noida) shall be the nodal agency Ior category A` and UPSIDC or concerned Development Authority, as directed by the Government, shall be the nodal agency Ior the category B` and UPSIDC shall be the nodal agency Ior category 'C' as land acquisition in this area (iI permissible under other provisions oI this policy, then) shall be done by them Ior providing the land Ior SEZ.
3.4 II there is requirement oI land acquisition in category 'C' SEZs, then the land acquisition (iI permissible under other provisions oI this policy, then) will be done by UPSIDC.
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3.5 Duties/ Liabilities and Rights oI the Developer and Nodal Agency shall be Iixed as per DRA (Development Rights Agreement). For the purpose, proposed DRA can be used as given in the reIerred report oI consultant, Ernst&Young.
3.6 Following arrangements shall be made in DRA :-
(1) DRA shall be valid Ior 70 years Irom the date oI execution, which can be terminated beIore 70 years as per conditions oI the agreement. The agreement can be extended Ior Iurther 20 years with mutual consent.
(2) Developer Company shall be Iully empowered to Iix, levy and collect the Iees / charges against usage and creation oI various services & Iacilities provided by them, related to planning, design, Iinancing, marketing, development oI basic inIrastructure & maintenance, operation, management and administration oI zone.
(3) Developer Company shall have to develop the zone in Iixed phases, under development milestones as per terms & conditions oI DRA. II Developer is Iailed to achieve the milestone within stipulated period then a cure period oI 90 days can be granted on the payment oI damages as Iixed in DRA.
(4) Minimum and maximum limitations oI various land use shall be Iixed.
(5) Developer will have to produce an implementation scheme. This implementation scheme will be made on six monthly basis. As per this Iollow-up oI work disposal shall be done by an independent engineer Iirm.
(6) Maximum time limit Ior the entire development oI SEZ shall be mentioned in the DRA. Consultant Company has given advise Ior the development oI all three phases in 10 years.
(7) Developer has to make available the perIormance bank guarantee. This guarantee will satisIy availability oI various services & Iacilities and liabilities related to maintenance against a proper Iees apart Irom other liabilities. For the redressal oI complaints to be lodged by the established 64
units against the developer, there will be a Committee be constituted under the chairmanship oI Development Commissioner oI SEZ.
(8) Works/ liabilities oI concerned nodal agency shall be mentioned in DRA.
(9) Wherever applicable, as per requirement, to make arrangements Ior Lease Deed execution in Iavour oI Developer Ior every phase and arrangement oI land value & lease deed by the nodal agency.
4. VALUE OF LAND 4.1 Value oI the land to be made available Ior the SEZs oI category A` & B` shall be Iixed on the basis oI the prevailing rules oI the Institution/ Authority providing/ allotting land. ThereIore, it will be necessary that authorities shall keep on Iixing the land rates (developed & undeveloped) Ior the various purposes Irom time to time. These will have to be mentioned in DRA. Because there are no development authorities in category C`, thereIore in the absence oI Iixed rates oI land Ior the various purposes, nodal agency will charge entire amount (inclusive oI interest and all other charges) spent on land acquisition Ior the SEZ.
4.2 Total cost oI land shall be recovered upIront as lease premium beIore the execution oI lease. II developer oIIers share in revenue also, that can be accepted but this cannot be accepted as an alternative oI lease premium in part or in total.
4.3 There will be no interIerence oI development authority / UPSIDC, as Iar as charges to be levied by the developer Irom the units to be established under the SEZ. This will be market regulated.
5. USE OF LAND FOR VARIOUS PURPOSES As minimum 50 processing area has been Iixed by the Government oI India, in this context the land utilisation has been Iixed Ior diIIerent purposes as under :-
LAND USE LIMIT 1. Processing Area Minimum 50 2. Green belt and basic amenities Minimum 25-25 oI both processing and non-processing areas. 3. Commercial, Institutional and Residential Maximum 10, 10 and 15 oI total area respectively. 66
6. SPECIAL ECONOMIC ZONE LAND USE UNDER MASTER PLAN
6.1 The master plan land use oI approved area Ior SEZ shall be SEZ which shall be a separate land use. AIter the notiIication oI Government oI India is issued under section 4(1) oI Special Economic Zone Act, 2005, the State Government shall issue the notiIication Ior change oI land use oI concerned area into SEZ without any changing Iee in the case oI para 6.2.2 and aIter the payment oI necessary changing Iee in the case oI 6.2.3, the procedure oI this land use shall be kept separate Irom the normal legal procedure. A suitable amended legal procedure shall be made Ior this purpose.
6.2 Since residential, commercial etc. purposes are also admissible in non- processing area beside industrial (processing area) in SEZ, thereIore -
6.2.1 Under SEZ land use commercial and social purposes such as educational, medical, hotel, entertainment, residential and commercial complex etc. shall be admissible upto such extent which are admitted/sanctioned by notiIied regulations or under provisions under Special Economic Zone Act, 2005 by the Government oI India same F.A.R/F.S.I shall be admissible in processing area which shall be admissible Ior industrial land use in that development area. But in case oI I.T., gems & jewellery and Biotech SEZ this shall be admissible F.A.R/F.S.I Ior institutional land use. The FAR/ FSI in the non-processing area oI the SEZ shall be decided on the basis oI the land use applicable in the concerned development authorities/updated master plan oI the corporation and as mentioned in the building regulation. In case oI contradiction in the provisions oI FAR/ FSI oI the Master Plan and Building Regulations, FAR/ FSI shall be as per the provisions oI National Building Code. This FAR/ FSI shall be as applicable on the date oI submission oI the map. For above mentioned admissibility oI F.A.R/F.S.I Ior SEZ in category 'C', the provisions oI U.P. State Industrial Development Authority shall be Iollowed.
6.3 II any land is made available or allowed Ior SEZ by the nodal agency, the land use oI such land shall be assessed without Iee in S.E.Z.
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6.4 II sanction oI SEZ is given on the land allotted earlier and situated in the development area oI any development authority, the land use shall be changed in SEZ aIter taking prescribed changing Iee Ior change into industrial land use Ior processing area and aIter taking prescribed changing Iee Ior change into residential land use Ior non processing area. II the norms Ior changing Iee are not prescribed, it shall get prescribed by the government.
6.5 II the land oI SEZ is outside oI the development area oI any development authority, the land use SEZ shall get prescribed - provided that the construction map oI non processing area shall be sanctioned only when minimum 50 per cent processing area has got developed. But even then the construction map oI non processing area shall be sanctioned only Ior that proportionate area. Such areas shall be included in the development area oI U.P. State industrial development authority Ior bringing them in the area oI proper planning authority.
7. PAYMENT OF DEVELOPMENT FEE AND SANCTION OF LAY- OUT PLAN/SUB LAY-OUT PLAN/ BUILDING MAP
7.1 Since the internal development shall be made/caused to be made by the developer itselI, there shall be no payment oI internal development Iee.
7.2 II necessary external development work is done by SEZ Developers on their own then no external development Iee shall be charged. In case any external development work done by the Government / Government Institution then its cost shall be payable as per rules.
7.3 No outer development Iee oI any kind shall be charged Ior any existing public inIrastructure but iI IortiIication/ upgradation oI those inIrastructural Iacilities Ior SEZ shall be necessary then proportionate expenditure shall be payable by SEZ developer.
7.4 Sanction of plan of development works: Where there is an agreement on D.R.A., this work shall be done accordingly. In other cases the lay-out plan shall be sanctioned by the development authority concerned. The building map shall be deemed to be automatically sanctioned on the authentication oI empanelled Architects (iI empanelment done, otherwise 68
any registered Architect) oI concerned land allotting Institution/ Authority (as per building bye-laws/ sanctioned lay-out plan/master plan).
8. Admissibility of sub-lease 8.1 Lease/sub-lease will be admissible on land made available Ior SEZ by Government or Government Institution according to the requirement oI regulations by the Government oI India or the state government. The lease or sub-lease holder developer or units may avail Iinancial Iacilities by mortgaging the lease or sub-lease.
8.2 II the land marked Ior SEZ was made available Ior industrial purposes/institutional purposes by the government or any government institution but there was no admissibility oI sub-lease in the conditions oI the lease, the sub-lease will be made available according to the requirements oI the SEZ regulations exempting the conditions oI the lease and charging the Iollowing Iee on such land:-
On payment oI transIer Iee payable Ior transIer in accordance with the normal procedure oI the allotting institution but iI there is no procedure as such in the institution, then the policy oI any other suitable institution shall be Iollowed Ior this purpose. II such land is proposed to give on sub-lease to a cent-percent subsidiary company oI the allotting institution/company, then no transIer Iee shall be charged.
9. Special provisions for I.T.S.E.Z.
9.1 Land use oI I.T. S.E.Z.:
II a SEZ is proposed on any land/plot allotted earlier Ior I.T. Park/ITES by any authority, then the Iixed land use conversion charges shall be payable only on the non-processing area oI the ITSEZ. Accordingly, Ior calculating the land use conversion charges, iI any norms have been approved in the past regarding ratio oI processing area and non-processing area Ior IT activities oI any institute, then the conversion charges shall be charged only in case oI non-processing area is more than the above ratio.
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9.2 In view oI the para 10.6 oI U.P. IT Policy - 2004 " the Mega Investment units shall be made available land at a rate which is atleast 25 lesser than the sector rate, by Development Authorities, Industrial Development Authorities, Housing Development Board", 25 exemption on land allotment rate Ior only SEZ Processing Area oI ITSEZ shall be applicable and accordingly at the time oI calculating the land allotment rate, iI any norms have been approved in the past regarding the ratio oI processing area and non-processing area, then 25 exemption shall be applicable as it is on the above ratio limit on processing/non- processing area and in case non-processing area is more than the said ratio, then institutional usage rate shall be charged on the additional area. In cases where this 25 exemption is already been availed and SEZ has been approved on that land subsequently or an SEZ is proposed to be established, then in these cases the diIIerence, iI any, according to this system shall be charged and recovered.
9.3 In view oI the para 10.17 oI U.P. I.T. Policy-2004, 50 more FAR to be allowed Ior IT units in earmarked areas/ I.T. Parks (STPs), it has been decided that 50 additional FAR shall be available Ior only the processing area oI ITSEZ. No additional FAR shall be allowed in the non-processing area but in case additional FAR has already been approved Ior any area, and it is not possible to withdraw it, then the increased FAR should continue. But in no case the additional FAR in non-processing area shall be approved Ior Iuture land allotments.
9.4 The norms laid by Government oI India shall be Iollowed Ior processing area/non-processing area oI IT SEZ.
9.5 As only 25 acres the land is required Ior IT SEZ, which is a very small land area, there seems no proper justiIication to execute DRA (Development Rights Agreement) Ior the purpose. However, the concerned authority/institute may decide on the necessary security measures, as required, on their own.
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ANNEXURES 71 No. State- wise Name of SEZs location State type 1 1 Kandla Special Economic Zone Kandla, Gujarat GJ Multi product 2 2 SEEPZ Special Economic Zone Mumbai, Maharashtra MH Electronics and Gems and Jewellery 3 3 Noida Special Economic Zone Uttar Pradesh UP Multi product 4 4 MEPZ Special Economic Zone Chennai, Tamil Nadu TN Multi product 5 5 Cochin Special Economic Zone Cochin, Kerala KL Multi product 6 6 Falta Special Economic Zone Falta, West Bengal WB Multi product 7 7 Visakhapatnam SEZ Vishakhapatnam, Andhra Pradesh AP Multi product 8 1 Surat Special Economic Zone Surat, Gujarat GJ Multi product 9 2 Manikanchan SEZ, W. Bengal Kolkatta, West Bengal WB Gems and Jewellery 10 3 Jaipur SEZ Jaipur, Rajasthan RJ Gems and Jewellery 11 4 Indore SEZ Sector-3, Pithampur Distt. Dhar (MP) MP Multi product 12 5 Jodhpur SEZ Jodhpur, Rajasthan RJ Handicrafts 13 6 Salt Lake Electronic City - WIPRO, West Bengal Kolkatta, West Bengal WB Software development and ITES 14 7 Mahindra City SEZ (IT), T. Nadu Tamil Nadu TN IT/Hardware and Bio- informatics 15 8 Mahindra City SEZ (Auto ancillary ), T. Nadu Tamil Nadu TN Auto 16 9 Mahindra City SEZ (Textiles), Tamil Nadu Tamil Nadu TN Apparel and fashion accessories 17 10 Nokia SEZ Sriperumbudur, Tamil Nadu TN Telecom equipments/R&D services 18 11 Moradabad SEZ Moradabad, UP UP Handicrafts 19 12 Surat Apparel Park Surat, Gujarat GJ Apparel Andhra Pradesh No. State- wise Name of SEZs location State type 20 1 Andhra Pradesh Industrial Infrastructure Corporation Ltd. Nanakramguda Village, Serilingampalli Mandal, Ranga Reddy District, Andhra Pradesh AP IT/ITES 21 2 APIIC Ltd, Jedcharla Pollepally Village, Jedcharla Mandal AP Pharma 22 3 APIIC Visakhapatnam AP Multi product 23 4 APIIC Madhurwara, Hill No.3 Visakhapatnam AP IT/ITES 24 5 Brandix India Apparel City Private Ltd. Achutapuram, Visakhapatnam AP Textile List of Operational Special Economc Zone Exports from SEZs established by Central Government State Govt. /Private SEZs notified prior to SEZ Act, 2005 Exports from SEZs notified under the SEZ Act, 2005 72 25 6 Ramky Pharma Cit Pvt. Ltd. Mandal, Visakhapatnam AP Pharmaceuticals 26 7 CMC Limited Ranga Reddy District, Hyderabad, Andhra Pradesh AP IT/ITES 27 8 DivyaSree NSL Infrastructure Private Limited Ranga Reddy District, Hyderabad, Andhra Pradesh AP IT/ITES 28 9 DLF Commercial Developers Ltd Ranga Reddy District, Hyderabad, Andhra Pradesh AP IT/ITES 29 10 Hyderabad Gems SEZ Ltd. Ranga Reddy District, Hyderabad, Andhra Pradesh AP Gems and Jewellery 30 11 Fab City SPV(India) Pvt. Ltd. R R District Andhra Pradehs AP IT/ITES 31 12 Divis Laboratories Limited Chippada Village, Visakhapatnam, Andhra Pradesh AP Pharmaceuticals 32 13 Apache SEZ Development India Private Limited Mandal Tada, Nellore District, Andhra Pradesh AP Footwear 33 14 L&T Phoenix Infoparks Pvt. Ltd. Mandal, Andhra Pradesh AP IT/ITES 34 15 Lanco Hills Technology Park Pvt. Ltd. Manikonda Village, Rajendra Nagar, Mandal AP IT/ITES 35 16 Maytas Hill County SEZ Pvt Ltd- Bachupally Bachupally Village, Mandal AP IT/ITES 36 17 Serene Properties Pvt Ltd. Pocharam Vil1age, Hayathna Gar, Taluka Ghatkesar Mandal AP IT/ITES 37 18 Sundew Properties Pvt. Limited Madhapur, RR District AP IT/ITES 38 19 Wipro Limited-Manikonda Manikonda, Mandal, RR AP IT/ITES 39 20 Navayuga Legal Estates Pvt. Ltd. Serilingampally village, Ranga Reddy District, AP AP IT/ITES 40 21 Sri City Pvt. Ltd. Gollavaripalem, villages Satyavedu Mandals, Andhra Pradesh AP Multi Product Chandigarh 41 1 Rajiv Gandhi Technology Park,Phase-1 Chandigarh Chandigarh CH Electronics Hardware, and IT/ITES Gujarat 42 1 Essar Hazira SEZ Limited Village Hazira, Taluka Choryasi, Gujarat GJ Engineering Products 43 2 Mundra Port & Special Economic Zone Gujarat GJ Multi Product 44 3 Suzlon Infrastrucutre Ltd. Vadodara GJ Hi-tech Engineering products and related services 45 4 Gujarat Industrial Development Corporation (Apparel) Ahmedabad, Gujarat GJ Apparel 46 5 Reliance Jamnagar Infrastrucure Ltd. Jamnagar GJ Multi Product 47 6 Zydus Infrastructure Pvt. Ltd. Sanand, Ahmedabad GJ Pharmaceutical 48 7 Dahej SEZ Ltd. Dahej GJ Multi Product 49 8 Larsen & Toubro Ltd. Ankhol & Bapad, Distt. Vadodara GJ IT/ITES 73 Haryana 50 1 DLF Cyber City, Gurgaon Gurgaon, Haryana HR IT/ITES 51 2 DLF Limited Gurgaon, Haryana HR IT/ITES 52 3 Gurgaon Infospace Ltd, Gurgaon Gurgaon, Haryana HR IT/ITES Karnataka 53 1 Manyata Embassy Business Park Bangalore, Karnataka KN IT/ITES 54 2 WIPRO Limited Doddakannelli Village, Varthur Hobli, Electronic City, Banglore, Karnataka KN IT 55 3 WIPRO Limited(SR) Doddakannelli Village, Varthur Hobli, Sarjapur Road, Karnataka KN IT 56 4 Infosys Technologies SEZ Mangalore Bangalore, Karnataka KN IT/ITES 57 5 Vikas Telecom Limited Bangalore, Karnataka KN IT/ITES 58 6 Adarsh Prime Projects Private Limited Devarabeesanahalli, Bhoganahalli and Doddakanahalli, Karnataka KN IT/ITES 59 7 Shyamaraju and Company (India) Pvt. Ltd. (Divyashree) Kundalahalli Village, Krishnarajapuram, Karnataka KN IT/ITES enabled sevices 60 8 Cessna Garden Developers Pvt. Ltd. Bangalore, Karnataka KN IT/ITES 61 9 Global Village SEZ (Tanglin Development Ltd.) Pattengere/Mylasandra Villages, Karnataka KN IT/ITES 62 10 Tanglin Development Ltd.(Global Village SEZ) Pattengere/Mylasandra Villages, Karnataka KN IT/ITES 63 11 Biocon Limited. Anekal Taluk, Banglore, Karnataka KN Biotechnology 64 12 KIADB (textile) Hasan, Karnataka KN Textile 65 13 Information Technology Park Ltd. Bangalore Karnataka KN IT/ITES 66 14 Primal Projects Private Limited Banglore, Karnataka KN IT/ITES 67 15 Bagmane Construction Pvt. Ltd. Bangalore North, Karnataka KN IT/ITES 68 16 Quest SEZ Development Private Limited Belgaum District, Karnataka KN Precision Engineering Product 69 17 Synefra Eng. & Const. (Suzlon Infrastructure Limited) Udupi Taluk, Karnataka KN hi-tech engineering products and related services 70 18 KIADB (Food) Samudravalli, Sankalapura KN Food Processing Kerala 71 1 Infopark SEZ Kochi KL IT/ITES 72 2 Electronic Technology Park-SEZ-I Trivandrum KL IT/ITES 73 3 Electronic Technology Park SEZ-II Trivandrum KL IT/ITES 74 4 Cochin Port Trust Vallapadam, Kerala KL Port based 75 5 KINFRA Film & Video Park, Trivandrum Kerala KL Animation & Gaming 76 6 KSITIl, Mulavana Kollam KL IT/ITES Maharashtra 77 1 Hiranandani Business Park Powai, Maharashtra MH IT/ITES 74 78 2 Infosys Technologies Ltd. Rajiv Gandhi Infotech Park, Ph. II, Vill. Mann, Tal. Mulshi, Dist. Pune MH IT/ITES 79 3 Serum Bio-pharma Park Pune, Maharashtra MH Pharmaceuticals & Biotechnology 80 4 EON Kharadi Taluka Haveli, District Pune, Maharashtra MH IT/ITES 81 5 WIPRO, Pune Hindawadi Pune, Maharashtra MH IT/ITES 82 6 DLF Akruti Hinjewadi, Phase-II, District Pune, Maharashtra MH IT/ITES 83 7 Maharashtra Airport Dev. Corporation Mihan, Nagpur, Maharashtra MH Multi Product 84 8 Dynasty Developers Pvt. Ltd.(Pune Embassy India Pvt. Ltd. Pune, Maharashtra MH IT/ITES 85 9 The Manjri Stud Farm Private Ltd Pune, Maharashtra MH IT/ITES 86 10 Maharashtra Industrial Development Corporation Ltd. Pune, Maharashtra MH IT/ITES 87 11 Syntel International Pvt. Ltd. Pune, Maharashtra MH IT/ITES 88 12 Magarpatta Township Development and Construction Company Ltd. Pune, Maharashtra MH Electronics Hardware and Software including information technology enabled 89 13 MIDC, Aurangabad District Aurangabad, Maharashtra MH Aluminium & Almn. Related ind. 90 14 Serene Properties Private Limited Kalwa Trans Thane Creek Industrial Area, MIDC, District Thane, Maharashtra MH IT/ITES Orissa 91 1 IDCO IT SEZ Bhubaneswar OR IT/ITES Rajasthan 92 1 Mahindra World City (Jaipur) Ltd. Kalwara Village, Jaipur, Rajasthan RJ IT/ITES Tamil Nadu 93 1 Tata Consultancy Services Limited Siruseri and Egattur, Chennai, Tamil Nadu TN IT/ITEs 94 2 ETL Infrastructure Services Limited Tambaram Taluk, Kancheepuram, Tamil Nadu TN IT/ITES 95 3 Hexaware Technologies Limited SIPCOT IT Park, Old Mahabalipuram Road, Siruseri, Chennai, Tamil Nadu TN IT/ITES 96 4 DLF Infocity Developers(Chennai) Ltd. Manapakkam & Mulivakkam Vill.,Kancheepuram Distt. Tamil Nadu TN IT/ITES 75 97 5 Arun Excello Infrstructure Private Limited Vallncheri and Potheri villages, Chengalpet Taluk, Kancheepuram Dist, Tamil Nadu TN IT/ITES 98 6 ETA Technopark Private Limited Old Mahabalipuram Road, Navallur Village, Chengalpet Taluk, Kancheepuram District TN IT/ITES 99 7 Electronics Corporation of Tamil Nadu Kancheepuram, Tamil Nadu TN IT/ITES 100 8 Coimbatore Hitech Infrastrure Pvt. Ltd. Coimbatore TN IT/ITES 101 9 Flextronics Technologies (India) Private Limited Sriperumbudur, Kancheepuram, Tamil Nadu TN Electronics Hardware and related services 102 10 SIPCOT Industrial area Sriperumbudur, Tamil Nade TN Electronics of Telecom hardware and support services including trading and logistic activities 103 11 Shriram Properties and Infrastructure Private Limited Perungalathur village, Chennai, Tamil Nadu TN IT/ITES 104 12 SIPCOT Oragadam TN Electronic Hardware 105 13 SIPCOT Gangai Kondan, tirunelveli TN Transport equipments 106 14 SIPCOT Perundurai TN Engineering 107 15 Suzlon Infrastrucutre Ltd. Coimbatore TN Hi-tech engineering sector 108 16 Cheyyar SEZ Cheeyar TN Footwear Uttar Pradesh 109 1 HCL Techmnologies Noida UP IT/ITES 110 2 Moser Baer SEZ, Greater Noida Greater Noida UP Non-conventional Energy including solar energy equipments/ cell 111 3 WIPRO Ltd. Greater Noida UP IT/ITES 112 4 Seaview Developers Limited Sector-135, Noida, Uttar Pradesh UP IT/ITES West Bengal 113 1 Unitech Hi-tech Structures Ltd. Rajarhat, Kolkata, West Bengal WB IT/ITES 114 2 M L Dalmiya & Co Ltd. Kolkata WB IT/ITES 76 APPENDIX 14-I-M
Guidelines for revival/exit of sick EOU/SEZ Units Please see paragraph 6.38 of the Chapter 6 & Paragraph 7.34 of the Chapter 7 of the Handbook of Procedures (Vol.-I) To revive units which may have become sick and to provide an exit route to those units, who may want to move out of the EOU/SEZ Scheme, the following guidelines are prescribed :-
1. Revival of operations:
i) A unit which has been declared sick by the appropriate authority shall submit a revival package through the Development Commissioner concerned to the Board of Approval for consideration and approval.
The Board shall consider the following:
a) Extension in the period for fulfillment of NFE for a further period up to a maximum of 5 years at the prevalent norms of the EOU/SEZ Scheme.
b) On extension of the period, unutilized raw material and imported/domestically procured capital goods shall be allowed to be carried forward at their original value.
ii) On grant of extension, the LUT executed by the unit shall be suitably revised.
2) Transfer of sick unit
i) In case an entity is willing to takeover all the assets and liabilities of a sick unit, transfer of such assets and liabilities as per the dispensation indicated in Para 1 above shall be considered by the Board of Approvals. An application for such takeover may be submitted through the Development Commissioner concerned to the BOA for approval.
ii) The sick unit could also transfer the imported/domestically procured capital goods and raw material to another EOU/SEZ units. For the buying units, it shall be treated as a domestically sourced goods for the purpose of NFE.
3) Utilisation of space
i) In the event of a SEZ unit is granted extension of period for fulfillment of NFE as indicated in Para 1 above, the space provided by the zone administration would continue to be in its possession. The Development Commissioner shall not charge any penal interest payable on rental for the period for which the unit has remained closed up to the date of the new bonding period.
ii) In event of the units exit from the Scheme as indicated at Para 2 (i) and (ii), the unit shall be liable to pay all the rental dues as decided by the Development Commissioner. However, if the unit is being taken over by another unit, the liability shall pass on to the unit, which is taking over the sick unit, subject to an undertaking being given by the later. However, no penal interest on rental dues shall be charged for the closure period before take-over.
iii) All adjudication proceeding under FTDR Act shall remain in abeyance in case of revival/take over of sick unit and approval of it by the Board of Approval.
77 APPENDIX 14-I-L
GUIDELINES FOR EXIT OF EOU/SEZ/EHTP/STP UNITS
a) Applicable customs and excise duties would be paid, on the imported and indigenous capital goods, raw materials, components, consumables, spares and finished goods in stock. The unit may be allowed to dispose off raw material, components, consumables etc. against duty free licenses. The unit may also be permitted to export the CG, raw material/components etc.
b) The penalty imposed by the appropriate authority, under the Foreign Trade (Development and Regulation)Act, 1992 for non-fulfillment of the conditions of approval, would be paid. In case an appeal against an order imposing penalty is pending, exit from the Scheme would be considered if the unit has obtained a stay order from Competent Authority and has furnished a Bank Guarantee for the penalty adjudicated by the appropriate authority unless the appellate authority makes a specific order exempting the unit from this requirement.
c) In case the unit has failed to fulfill the terms and conditions of LOA and penal proceedings are to be taken up/are in process, a legal undertaking for payment of penalties, that may be imposed, would be executed with the concerned Development Commissioner as per enclosed proforma at Annexure.
d) Units located in the Special Economic Zones would be required to immediately vacate their premises after approval for exit from the Scheme. EOUs wishing to continue operations in the DTA would need to comply with industrial, locational, environment or other laws, rules and regulations in force for DTA units.
NOTE: i) The unit would fulfill the above mentioned standard conditions in a period of six months from the date of issue of in principle exit letter and obtain final exit permission from the Development Commissioner/SIA (in case manufacturing of item requires Industrial Licence) failing which the approval granted would lapse automatically. DC may however allow a further extension for fulfillment of the standard conditions in deserving cases. ii) Further, the unit would continue to be treated as EOU/EHTP/STP/SEZ unit till the date of final exit order or issue of fresh LOP under the new scheme in cases of conversion from one scheme to the other and subject to monitoring of the stipulated obligations under the relevant scheme.
78 Annexure
FORM OF LEGAL UNDERTAKING FOR EXIT OF THE UNIT
M/s ___________________________ _____________________ were granted LOA/LOP No.______________________________________ dated ________________ for setting up a EOU/SEZ Unit __________________________ at ________ for the manufacture and export of ____________________________________________ subject inter-alia to the condition that they would achieve positive NFE on cumulative basis as per provisions of EOU/SEZ Scheme.
The unit filed a legal undertaking as per Appendix 14-IF of EOU/SEZ Scheme on _______________________ with the President of India through the Development Commissioner,_____ SEZ for achieving the above mentioned commitments.
As against the above commitments, the units actual performance has been as under: -
Year Import Export CG RM
The unit applied for exit from the EOU/SEZ Scheme which was approved vide letter No._________________________ dated _______________ subject inter-alia to the condition that penalty imposed by appropriate Authority under the F.T.(D&R) Act, 1992 for non fulfilment of the conditions of approvals would be paid.
In view of the approval for exit, I/We ___________________________________________________________ hereby undertake as under:
(i) That I/We _______________________________________________________ shall pay whatever penalties are imposed by the Development Commissioner under FT(DR) Act for non-fulfilment of the terms and conditions of LOA/LOP.
(ii) That I/We____________________________________________________ shall adhere to the mode of payment of penalties, if any, and time frame in which penalties are required to be paid to the Director General of Foreign Trade without any demur or protest.
Full and expanded description of The unit with full address.
IN WITNESS WHEREOF the unit hereto has duly executed this agreement on ______________________________ this ______________________________ day of ___________________________200__ signed, sealed and delivered by the unit in the presence of :
1. Name ___________________________ Address ___________________________
2. Name ___________________________ Address ___________________________ ___________________________
(To be authenticated/affirmed by Ist class Magistrate/ Notary Public)
Accepted by me on behalf of the President of India.