Chapter 7

Special Economic Zone

 

 

 

Scheme

7.1

This may be called the Special Economic Zones Scheme.

Definitions

7.2

For the purposes of Special Economic Zone scheme, unless the context otherwise requires, the following words and expressions shall have the meanings attached to them as given in the Policy.

Status of SEZs

7.3.1

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. 

 

7.3.2

Goods and services going into the SEZ area from DTA shall be treated as exports and goods and services coming from the SEZ area into DTA shall be treated as if these are being imported.

 

7.3.3

The Special Economic Zones may have areas, demarcated as,-

 

 

(a)

Processing areas for setting up of units for production of goods and rendering of services; and

 

 

(b)

non-processing areas, if any.

Setting up of SEZ in Private/ joint/State Sector 

7.4.1

A SEZ may be set up in the public, private or joint sector or by State Government. Guidelines for setting up of Special Economic Zones in the public/ private/ joint Sector or by the State Government is given in Appendix-14-IIO.

 

7.4.2

Project proposal for setting up of SEZ, recommended by the concerned State Government, shall be considered by the Board of Approval in the Department of Commerce as given in Appendix 14-ID.

 

7.4.3

On approval of the proposal, a Letter of Permission shall be issued to the developer for development, operation and maintenance of SEZ as given in Appendix-14-IIP. Format of Letter of Permission for developers engaged in operation and maintenance of SEZ is given in Appendix-14-IIQ.

Registration of Developer 

7.5.1

The developer shall obtain RCMC from the concerned Development Commissioner of SEZ.

Entitlements of SEZ Developer

7.5.2

For development, operation and maintenance of infrastructure facilities in SEZs, the developer shall be eligible for the following entitlements:

 

 

(a) Income Tax exemption as per 80 IA of the Income Tax Act.

 

 

(b) Import/ procure goods without payment of Customs/Excise duty.

 

 

(c) Exemption from Service Tax

 

 

(d) Exemption from CST.

 

7.6

Deleted.

Eligibility of SEZ units

7.7.1

SEZ units may be set up for manufacture of goods and rendering of services.

Application /Approval and Renewal of Approval

7.7.2

For setting up a unit in SEZ, three copies of the application in the form given in Appendix-14-IA. may be submitted to the Development Commissioner (DC) of the SEZ concerned

 

7.7.3

Applications for setting up a unit in SEZ other than proposals for setting up of unit in the services sector (except R&D, software and IT enabled services, trading or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per the procedure indicated in Appendix-14-IB. In other cases, approval may be granted by the Development Commissioner after clearance by the Board of Approval. Sector specific conditions relating to the approval are given in Appendix-14-IC.

 

7.7.4

Proposals for setting up units in SEZ requiring Industrial Licence may be granted approval by the Development Commissioner after clearance of the proposal by the SEZ Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits.

 

7.7.5

Letter of Permission (LOP)/Letter of Intent (LOI) issued to SEZ units as per standard format indicated at Appendix-14-IE. shall be valid for a period of 3 years for commencement of production. The LOP/LOI shall be valid for a period of five years from the date of commencement of production and would be construed as a licence for all purposes. On completion of 5 years operation, the approval may be renewed by the Development Commissioner concerned for a period of 5 years at a time on receipt of application for renewal from the unit.

 

7.7.6

Each LOP/LOI shall have separate ear-marked premises and shall specify the items of manufacture/service activity, annual capacity, projected annual export for the first five 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

 

7.7.7

In case of any change in approved activity or undertaking any new activity by SEZ units, the Development Commissioner shall issue amended LOP within six days on receiving intimation from the unit.

Legal Undertaking

7.8

The unit shall execute a legal undertaking with the Development Commissioner concerned in the form given in Appendix-14-IF.

Export

7.9.1

SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies and components except prohibited items of exports in ITC (HS). The units may also export by-products, rejects, waste scrap arising out of the production process. Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS).

 

7.9.2

SEZ units, other than trading/service unit, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer, subject to RBI clearance, if any. 

 

7.9.3

At the time of export of jewellery, the shipping bill and the invoice presented to the Customs authorities shall contain the description of the items, its weight, purity of gold/ silver/platinum, type of Gem & Jewellery stone (diamond, ruby, sapphire, cubic zircon etc.) used for studding and studding weight in carats, FOB price rate of the jewellery item, quantity in pieces and total value.

 

7.9.4

The SEZ unit may export jewellery on the basis of a notional rate certificate to be issued by the nominated agency. This rate will be based on the prevailing Gold/USD rate and the USD/INR rate in the notional rate certificate. The certificate issued by the nominated agency should not be older than 3 working days of the date of Shipment.

 

7.9.5

The exporter shall have the flexibility to fix the price and repay the gold loan within 60 days from the date of export. The price shall be communicated to the nominated agencies who will issue a certificate showing the final confirmation of the rate to the bank negotiating the document, to ensure export proceeds are realized at this rate.

 

7.9.6

Software units may undertake exports using data communication links or in the form of physical exports (which may be through courier service also), including export of professional services.

Import/domestic procurement

7.10.1

SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC(HS). However, if any permission is required for import under any other law, the same shall be allowed with the approval of the Board of Approval. Goods shall include raw material for making capital goods for use within the unit. The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients.

 

 

7.10.2

In case of doubt as to whether the item is required by the unit for its activities or in connection therewith, the decision of the concerned Development Commissioner shall be final.

 

7.10.3

The import shall be subject to the following conditions:

 

 

(a) The goods shall be imported into the premises of the unit.

 

 

(b) The procedure as prescribed under Customs/ Excise rules for SEZ will be followed and general bond executed with Customs/Excise authority.

 

 

(c) Goods already imported/shipped/ arrived before the issue of Letter of Permission (LOP)/Letter of Intent (LOI) are also eligible for duty free clearance under the SEZ scheme provided customs duty has not been paid and the goods have not been cleared from customs.

 

7.10.4

SEZ units may procure goods required by it without payment of duty, from bonded warehouses in the DTA set up under the Policy and/or under Section 65 of the Customs Act from International Exhibitions held in India. 

 

7.10.5

SEZ units, may import/procure from DTA, without payment of duty, all types of goods for creating a central facility for use by units in SEZ. The Central facility for software development can also be accessed by units in the DTA for export of software.

 

7.10.6

Gem and Jewellery units may also source gold/ silver/ platinum through the nominated agencies.

 

7.10.7

SEZ units obtaining gold/silver/ platinum from the nominated agencies on loan basis shall export gold/ silver/platinum jewellery within 60 days from the date of release. This shall not however apply to the outright purchase of precious metal from the nominated agencies.

 

7.10.8

SEZ units may import/procure goods and services from DTA without payment of duty for setting up, operation and maintenance of units in the Zone.

 

7.10.9

Goods, except capital goods and spares, shall be utilized within the approval period of 5 years.

Leasing of Capital Goods

7.11.1

SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case the SEZ unit and the domestic/ foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty.

 

7.11.2

Capital goods procured from indigenous sources on the basis of lease agreement between the leasing company and the SEZ unit will be eligible for Central Excise exemption

 

7.11.3

The value of imported capital goods financed through leasing companies or obtained free of cost and/or loan basis shall also be taken into account for the purpose of calculation of Net Foreign exchange Earning (NFE).

Net Foreign Exchange Earnings (NFE)

7.12.1

SEZ unit shall be a positive Net Foreign Exchange Earner. Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively for a period of five years from the commencement of production according to the following formula:

 

 

Positive NFE = A – B >0

Where:

A : is the FOB value of exports by the SEZ unit; and

B: is the sum total of the CIF value of all imported inputs and the CIF value of all imported capital goods, and the value of all payments made in foreign exchange by way of commission, royalty, fees, dividends, interest on external borrowings during the first five year period or any other charges. "Inputs" mean raw materials, intermediates, components, consumables, parts and packing materials.

 

7.12.2

If any goods are obtained from another SEZ/EOU/ EHTP/ STP unit or bonded warehouses or procured from an international exhibitions held in India or precious metals procured from nominated agencies or from advance licencing holder in fulfillment of his export obligation, the value of such goods shall be included under B.

 

7.12.3

If any capital goods imported duty free or leased from a leasing company, received free of cost and/or on loan basis or transfer, the CIF value of the capital goods shall be included pro-rata, under B for the period it remains with the unit.

 

7.12.4

For annual calculation of NFE, the value of imported capital goods and lumpsum payment of foreign technical know-how fee shall be amortized as under;

 1st –10th Year : 10% each year

Maintenance of accounts

7.13.1

SEZ unit shall maintain proper account, and shall submit quarterly and annual report as prescribed in annexures to Appendix-14-IF to the Development Commissioner/Customs.

 

7.13.2

The unit shall be able to account for the entire quantity of each category of homogenous goods imported/procured duty free, by way of exports, sales/supplies in DTA or transfer to other SEZ/EOU/EHTP/STP units and balance in stock. However, at no point of time the units shall be required to co-relate every import consignment with its exports, transfer to other SEZ/ EOU/ EHTP/STP units, sales in the DTA and balance in stock. Any matter for clarification as to whether goods are homogenous or not shall be decided by the Unit Approval Committee. The unit approval committee shall also review imported/domestically procured goods not utilized within five-year period as part of annual performance review.

Monitoring of performance 

7.14.1

The performance of SEZ units shall be monitored by the Unit Approval Committee as per the guidelines given in Appendix-14-IG.

 

7.14.2

Failure to ensure positive NFE or to abide by any of the terms and conditions of the LOP/LUT shall render the unit liable to penal action under the provisions of the Foreign Trade (Development & Regulation) Act, 1992 and the Rules and Orders made there under without prejudice to action under any other law/rules and cancellation or revocation of LOP.

DTA Sale and Supplies

7.15.1

(a) SEZ unit may sell goods, including by-products, and services in DTA in accordance with the import policy in force, on payment of applicable duties.

 

7.15.2

DTA sale by service/trading unit shall be subject to achievement of positive NFE cumulatively. Similarly for units undertaking manufacturing and services/ trading activities against a single LOP, DTA sale shall be subject to achievement of NFE cumulatively.

 

7.15.3

Scrap/waste/remnants/

rejects arising out of production process or in connection there with may be sold in the DTA on payment of applicable duty.

 

7.15.4

Scrap/dust/sweeping of gold/silver/platinum may be sent to the Government of India Mint/Private Mint from the SEZ units and returned to them in standard bars in accordance with the procedure prescribed by the Customs authorities or may be permitted to be sold in the DTA on payment of applicable Customs duty, on the basis of gold/silver/platinum content, as may be notified by Customs authorities.

DTA Supplies to count towards NFE

7.16.1

The following supplies effected in DTA by SEZ units will be counted for the purpose of fulfillment of positive NFE:

 

 

(a) Supplies effected in DTA to holders of advance licence for annual requirement/DFRC under the duty exemption/remission scheme/FPCG scheme.

 

 

(b) Supplies made to free trade Warehousing set up under the Policy and/or under Section 65 of the Customs Act where payment is received in free foreign exchange.  

 

 

(c) Supplies against special entitlements of duty free import of goods.

 

 

(d) Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance

 

 

(e) Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.

 

 

(f) Supplies of Electronic and IT Hardware items, having zero Customs duty provided the items are manufactured in the unit.

Supplies to other EOU/STP/EHTP/SEZ units

7.16.2

Supplies to other EOU/SEZ/ EHTP/ STP units shall also be counted towards NFE provided that such goods are permissible for procurement by units.

Entitlement for Supplies from the DTA

7.17.1

DTA supplier to SEZ shall be entitled for:-

 

 

(a) Drawback

or

DEPB in lieu of Drawback

 

 

(b) Discharge of export performance, if any.

 

7.17.2

Notwithstanding the above, SEZ units/SEZ Developer shall, on production of a suitable disclaimer from the DTA supplier, be eligible for obtaining the entitlement of Drawback or DEPB in lieu of Drawback.

 

7.17.3

SEZ units shall be entitled for:-  

 

 

(a) Exemption from Central Sales Tax;

 

 

(b) Exemption from payment of Central Excise Duty on all goods eligible for procurement.

 

 

(c) Reimbursement of Central Excise Duty, including additional excise duty, if any, paid on bulk tea procured from licenced auction centers by Development Commissioner of concerned Zone so long as levy on bulk tea in this regard is in force. The unit shall submit documentary evidence showing that the tea was procured from licenced auction centers along with the claim.

 

 

(d) Reimbursement of Duty paid on fuels or any other goods procured from DTA as per the rate of drawback notified by the Directorate General of Foreign Trade from the date of such notification.

 

7.17.4

 

Supplier of precious and semi-precious stones, synthetic stones and processed pearls from Domestic Tariff Area to the units situated in SEZ shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in of the Handbook (Vol. I).

 

7.17.5

 

The procedure for submission of application for grant of Replenishment Licence for cut and polished diamonds, precious and semi-precious stones, synthetic stones and processed pearls shall be as contained in the Policy. However, the application shall be made to the Development Commissioner of the SEZ concerned.

 

7.17.6

The entitlements under paragraph 7.17.1 and 7.17.3 (b) above shall be available provided the goods supplied are manufactured in India.

Export through Status holder

7.18

SEZ unit may also export goods manufactured or software developed by it, through a merchant exporter/ status holder recognized under this Policy or any other EOU/SEZ/ EHTP/STP unit subject to following conditions:

 

 

(a) The goods/software shall be produced/developed in the SEZ unit concerned.

 

 

(b) The level of NFE or any other conditions relating to the imports and exports as prescribed shall continue to be discharged by the SEZ unit concerned.

 

 

(c) The export orders so procured shall be executed within the parameters of SEZ Scheme and the goods shall be directly transferred from the SEZ unit to the port of shipment.

 

 

(d) Fulfillment of positive NFE by SEZ unit in regard to such exports shall be reckoned on the basis of the price at which the goods and services are supplied by SEZ units to the status holder/merchant exporter or other EOU/ EPZ/SEZ/ EHTP/ STP unit.

 

 

(e) All export entitlements, including recognition as status holder would accrue to the exporter in whose name foreign exchange earnings are realized. However, such export shall be counted towards fulfillment of obligation under SEZ scheme only.

Inter-unit Transfer 

7.19.1

SEZ units may transfer goods, including partly processed/semi-finished goods and services from one SEZ unit to another SEZ/EOU/ EHTP/STP unit. However, trading units in SEZ may sell/transfer imported goods to another SEZ/EOU/EHTP/STP units.

 

7.19.2

Goods imported/procured by a SEZ unit may be transferred or given on loan to another unit within the same SEZ, which shall be duly accounted for, but not counted towards discharge of export performance.

 

7.19.3

Capital goods imported/procured may be transferred or given on loan to another SEZ/EOU/ EHTP/ STP unit with prior permission of the Development Commissioner and Customs Authorities.

 

7.19.4

Transfer of goods as per paragraphs 7.19.1 and 7.19.2 within the same SEZ shall not require any permission but the units shall maintain proper accounts of the transaction. 

Other Entitlements

7.20.1

Units set up in SEZs established by the Government will be charged rent for lease of industrial plots and standard design factory buildings/ sheds as per rates fixed from time to time.

 

7.20.2

Exemption from Service tax.

 

7.20.3

Exemption from income tax as per the provisions of the Income Tax Act.

 

7.20.4

FOB Value of export of a SEZ unit can be clubbed with FOB value of export of its parent company in the DTA, or vice versa, for the purpose of according Export House, Trading House, Star Trading House or Super Star Trading House status;

 

7.20.5

Foreign Equity up to 100% is permissible for all manufacturing activities under automatic route except for the following:

 

 

(a) arms and ammunition, explosives and allied items of defence equipment, defence aircraft and warships

 

 

(b) atomic substances;

 

 

(c) narcotics and psychotropic substances and hazardous chemicals

 

 

(d) distillation and brewing of alcoholic drinks; and

 

 

( e) cigarettes/cigars and manufactured tobacco substitutes

 

7.20.6

Sectoral norms as notified by the Government shall apply to foreign investment in services and trading activities

 

7.20.7

SEZ units may retain 100% of their export proceeds in their EEFC account.

 

7.20.8

Export value of goods, software and services by SEZ units may be realized and repatriated to India as per the RBI instructions in the matter.

 

7.20.9

Software units may, in addition, also be allowed to use the computer system for training purpose (including commercial training) subject to the condition that no computer terminal shall be installed outside the Zone premises for the purpose

 

7.20.10

Procurement of raw materials and export of finished products shall be exempt from Central levies.

 

7.20.11

Exemption from Industrial Licensing for manufacture of items reserved for SSI sector

 

7.20.12

State Trading Enterprises Policy shall not apply to SEZ manufacturing units. Export of iron ore shall however be subject to the decision of the Government from time to time. Requirements of other conditions like minimum export price/export in consumer pack as per Exim Policy shall apply in case the raw materials are indigenous and exported without further processing/manufacturing by the SEZ unit. Export of textile items shall be covered by bilateral agreements, if any. Wood based units shall comply with the direction of Hon'ble Supreme Court contained in its order dated 12.12.1996 in Writ (civil) No, 202 of 1995- T.N.Godavarman Thirrumulppad v/s Union of India and others with WP(Civil) no 171 of 1996 in regard to use of timber/other wood.

 

7.20.13

SEZ unit may install one fax machine at a place of its choice, outside the Zone, subject to intimation of its location to the concerned Customs/Central Excise authorities.

 

7.20.14

SEZ units may, temporarily take out of the Zone duty free laptop computers and video projection systems for working upon by persons authorised by unit

 

7.20.15

SEZ units may install personal computers not exceeding two in number imported/ procured duty free in the registered/administrative office subject to the guidelines issued by Department of Revenue in this behalf

 

7.20.16

For IT and IT enabled services, persons authorized by the software units may access the facility installed in the SEZ unit through communication links.

Sub- Contracting

7.21.1

SEZ unit, including gem and jewellery units, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/EHTP/ STP units with the annual permission of Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner.

 

7.21.2

All units, including gem and jewellery, may sub-contract part of the production or production process through other units in the same SEZ without permission of Customs authorities subject to records being maintained by both the supplying and receiving units

 

7.21.3  

Sub-contracting by SEZ gems and jewellery units through units in other SEZ or EOUs or units in DTA shall be subject to following conditions:-

 

 

(a) Goods, finished or semi-finished, including studded jewellery, taken outside the zone for sub- contracting shall be brought back to the unit within 90 days.

 

 

(b) No cut and polished diamonds, precious and semi-precious stones (except precious/semi-precious stones and synthetic stones having zero duty) shall be allowed to be taken outside the zone for sub-contracting.

 

 

(c) Receive plain gold/silver/platinum jewellery from DTA/EOU/SEZ units in exchange of equivalent quantity of gold/silver/ platinum and the wastage thereon as may be notified, as the case may be, contained in the said jewellery.

 

 

(d) SEZ units shall be eligible for wastage as applicable for sub-contracting and against exchange

 

7.21.4

Scrap/waste/remnants generated through job work may be cleared from the job worker’s premises on payment of applicable duty or destroyed in the presence of Customs/Excise authorities or returned to the unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.

 

7.21.5

Export of finished goods from the job worker's premises may be permitted provided such premises are registered with the Central Excise authorities. Where the job worker is SEZ/EOU/EHTP/STP unit, no such excise registration is required and export may be effected either from the job workers’ premises or from the premises of the unit. Export of such products from the job worker's premises shall not be allowed through third parties as provided in the Policy.

 

7.21.6

SEZ units may, on the basis of annual permission from the Customs authorities, undertake jobwork for export, on behalf of DTA exporter, provided the finished goods are exported directly from SEZ units and export document shall jointly in the name of DTA/SEZ unit. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback.

 

7.21.7

SEZ units may be permitted to remove moulds, jigs, tools, fixtures, tackles, instruments, hangers and patterns and drawings to the premises of sub-contractors, subject to the conditions that these shall be brought back to the premises of the units on completion of the job work within a stipulated period. The raw materials may or may not be sent along with these goods.

 

7.21.8

In case of sub-contracting of production process abroad, the goods may be exported from the sub-contractor premises subject to the conditions that job work charges shall be declared in the export declaration forms, invoices etc. and full repatriation of foreign exchange shall be ensured by the SEZ unit.

Contract Farming

7.21.9

SEZ units engaged in production/processing of agriculture/horticulture products, may on the basis of annual permission from the Customs authorities take out inputs and equipments (specified at Appendix-14-IJ to the DTA farm subject to the following conditions:

 

 

(a) Supply of inputs by the SEZ to the contract farm(s) shall be subject to the input-output norms approved by the DGFT/BOA.

 

 

(b) There shall be contract farming agreement between the SEZ and the DTA farmer(s);

 

 

(c) The unit has been in existence for at least two years and engaged in export of agriculture/horticulture products; otherwise it shall furnish bank guarantee equivalent to the duty foregone on the capital goods/inputs proposed to be taken out to the Deputy/Assistant Commissioner of Customs/Central Excise till the unit completes two years.

Export Through Exhibitions

7.22.1

SEZ units may export goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner subject to the following conditions

 

 

(a) the unit shall produce to the Customs authorities the letter in original or its certified copy containing approval of the Development Commissioner. For gems and jewellery items, a self-certified photograph of the products shall also be submitted.

 

 

(b) in case of re-import, such items on arrival shall be verified along with the export documents before clearance

 

 

(c) items not sold abroad shall be re-imported within 60 days of the close of the exhibition. However, in case the exporter is participating in more than one exhibition within 45 days of close of the first exhibition, then the 60 days shall be counted from the date of close of the last exhibition.

 

 

(d) In case of personal carriage of goods and for holding/participating in overseas exhibitions, the value of gems and jewellery shall not exceed US $ 2 million

Personal Carriage of gems and jewellery for Export promotion tours

7.22.2

Personal carriage of gold/silver/ platinum jewellery, cut and polished diamonds, precious, semi-precious stones, beads and articles as samples upto US $ 100,000 for export promotion tours and temporary display/sale abroad by SEZ units is also permitted with the approval of the Development Commissioner subject to the following conditions:

 

 

(a) SEZ units shall bring back the goods or repatriate the sale proceeds within 45 days from the date of departure through normal banking channel

 

 

(b) The unit shall declare personal carriage of such goods to the Customs while leaving the country and obtain necessary endorsement.

Export through show rooms abroad /Duty Free Shops

7.23.1

Export of goods is also permitted for display/sale in the permitted shops set up abroad or in the show rooms of their distributors/agents. The items not sold abroad within 180 days shall be re-imported within 45 days.

 

7.23.2

SEZ unit may set up show rooms/retail outlets at the International Airports for sale of goods in accordance with the procedure laid down by the Customs authorities. The items remaining unsold after a period of 60 days shall be exported or returned to the respective SEZ units.

Personal carriage of Import/Export Parcels including through foreign bound passengers

7.24.1

Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. The export proceeds shall, however, be realized through normal banking channel. Import/export through personal carriage for units , other than gem and jewellery units, shall be allowed provided the goods are not in commercial quantity.

 

7.24.2

For Personal carriage of goods by foreign bound passenger, the following documents shall be submitted by SEZ units as proof of exports.

 

 

(a) Copy of the shipping bill filed by the SEZ units;

 

 

(b) A copy of the Currency Declaration Form filed by the Foreign buyer with the Customs at the time of his arrival; and

 

 

(c) Foreign Exchange Realisation/ Encashment Certificate from the Bank.

 

 

(d ) Personal carriage of parts by foreign bound passenger shall also be allowed in case the same are required for repairs of exported goods at customer site. The following documents shall be submitted as proof of export:

(i) permission letters from Customs for exports.

(ii) Invoice with value (for payment or free of charge).

 

7.24.3

In addition to this, Personal Carriage by foreign bound passenger on Document Against Acceptance (DA)/Cash On Delivery (COD) basis is also allowed. The SEZ units will have to furnish the following documents as proof of export.

 

 

(a) Copy of Shipping Bill.

 

 

(b) Bank Certificate of Export and Realisation.

 

7.24.4

The procedure for personal carriage of import parcels will be the same as for import of goods by airfreight except that the parcels shall be brought to the Customs by the SEZ unit/ foreign national for examination and release. Instructions issued by the Customs authorities in this regard should be followed mutatis mutandis.

Export/Import by  Post / Courier 

7.25

Goods including free samples, may be exported/imported by airfreight or through Foreign Post Office or through courier subject to the procedures prescribed by Customs.

Replacement/ Repair of Goods

7.26.1

The general provisions of Policy relating to export of replacement/ repaired goods shall apply equally to SEZ units, save that, cases not covered by these provisions shall be considered on merits by the Development Commissioner.

 

7.26.2

The units may send capital goods abroad, for repair and return. Any foreign exchange payment for this purpose will also be allowed.

 

7.26.3

The goods sold in the DTA and to be defective may be brought back for repair or replacement under intimation to the Development Commissioner. 

 

7.26.4

Goods or parts thereof, on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. In the event of replacement, the goods may be brought back from the foreign suppliers or their authorised agents in India or the indigenous suppliers. However, destruction shall not apply to precious and semi-precious stones and precious metals.

 

7.26.5

Goods may be transferred to DTA/abroad for repair/ replacement, testing or calibration, quality testing and R & D purpose under intimation to Customs authorities and subject to maintenance of records.

 

7.26.6

SEZ units may transfer goods for quality testing/R & D purpose to any recognized laboratory/ institution, upto Rs 5 lakhs per annum without payment of duty, on giving suitable undertaking to the customs for return of the goods. However, if the goods have been consumed/destroyed in the process of testing etc. a certificate from the laboratory/ institution to this effect shall be furnished to the Customs.

Samples

7.27.1

SEZ units may, on the basis of records maintained by them, and on prior intimation to Customs authority supply or sell samples in the DTA for display/market promotion on payment of applicable duties.

 

7.27.2

SEZ units may also remove samples to DTA without payment of duty under prior intimation to the Customs authorities subject to the condition that the goods shall be brought back within a stipulated period.

 

7.27.3

SEZ units may export free samples, without any limit, including samples made in wax moulds, silver mould and rubber moulds through all permissible mode of export including through couriers agencies/post.

Sale of unutilized material/destruction

7.28.1

In case a SEZ unit is unable, for valid reasons, to utilize the goods, and services, imported or procured from DTA, it may be transferred to other EOU/SEZ/EHTP/STP units or disposed off in the DTA on payment of applicable duties and submission of import license by DTA unit, wherever applicable or exported. Such transfer from SEZ unit to another SEZ/EOU/EHTP/STP unit would be treated as import for the receiving unit.

 

7.28.2

Capital goods and spares that have become obsolete/surplus may either be exported, transferred to another SEZ/EOU/EHTP/STP unit or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable will be available in case of disposal in DTA.

 

7.28.3

SEZ unit may be allowed by Customs authorities concerned to donate imported/ indigenously procured (bought or taken on loan) computer and computer peripherals, including printer, plotter, scanner, monitor, key-board and storage units without payment of duty, two years after their import/procurement and use by the units, to recognized non-commercial educational institutions, registered charitable hospitals, public libraries, public funded research and development establishments, organisations of the Government of India or Government of a State or Union Territory as per Custom/ Central Excise notification issued in this regard.

 

7.28.4

No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged and scrap/waste/ remnants/rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the Zone with the permission of Custom authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.

Self-Certification

7.29

All activities of SEZ units within the Zone, unless otherwise specified, including export and re-import of goods shall be through self certification procedure.

Distinct identity

7.30

If an industrial enterprise is operating both as a domestic unit as well as an SEZ unit, it shall have two distinct identities with separate accounts, including separate bank accounts. It is, however, not necessary for it to be a separate legal entity, but it should be possible to distinguish the imports and exports or supplies effected by the SEZ units from those made by the other units of the enterprise.

Powers of Units Approval Committee

7.31

The powers and functions of the Unit Approval Committee notified by the Government

(Appendix-14-IIR) shall be as under:

 

 

(a) To consider the applications for setting up of units in SEZ other than proposals for setting up of unit in the services sector (except R&D, software and IT enabled services, trading or any other service activity as may be delegated by the BOA) and items of manufacture requiring industrial licence under the Industrial (Development & Regulation) Act, 1951 shall be considered by the BOA;

 

 

(b) To consider and permit conversion of EOU into SEZ unit;

 

 

(c) to monitor the performance of the Units;

 

 

(d) to supervise and monitor permission, clearances, licences granted to the units and take appropriate action in accordance with law;

 

 

(e) to call for information required to monitor the performance of the unit under the permission, clearances, licence granted to it;

 

 

(f) to perform any other function delegated by the Central Government or its agencies.

 

 

(g) to perform any other function delegated by the State Governments or its agencies.

 

 

(h) to grant all approvals and clearances for the establishment and operation of Units in the Special Economic Zone.

 

Management of SEZ

7.32.1

SEZ will be under the administrative control of the Development Commissioner

Registration-cum-Member-ship Certificate

7.32.2

Registering authority for SEZ units, shall be the Development Commissioner of the SEZ concerned. A separate Registration-cum-Membership Certificate shall not be required in their cases as provided for in the Policy. However, SEZ units may also obtain RCMC from the Export Promotion Council for EOU & SEZ units.

Powers of the Development Commissioner

7.32.3

Apart from the original power delegated elsewhere, the Development Commissioners of SEZ will exercise the following powers in respect of SEZ units. Jurisdiction of Development Commissioners is given in Appendix-14-IK.

Importer-Exporter Code No.

 

(a) allot Importer-Exporter code number for SEZ units and SEZ developer.

 

 

(b) Approve all matters relating to post approval operation of the unit including import/procurement of additional capital goods, increase in value of capital goods on account of foreign exchange rate fluctuations, enhancement of production capacity, broad banding/diversification, change in name of the company or the implementing agency and change from a company to another provided the new implementing agency /company undertakes to take over the assets and liabilities of the existing unit and merger of two or more SEZ units.

 

 

(c) Cancel LOP/ LOI/IL wherever warranted.

 

 

(d) Adjudication under Section 13 read with Section 11 of Foreign Trade (Development & Regulation) Act, 1992 in respect of SEZ units.

 

 

(e) Action under the Public Premises Eviction Act in case the rent on the plot/built up premises allotted to the units is in arrears or if the plot/shed is not utilised for the purpose for which the same has been allotted.

 

 

(f) Valuation of exports declared on SOFTEX form by the units located in Special Economic Zones.

 

 

(g) Issuing eligibility certificates for grant of employment visa to low level foreign technicians to be engaged by SEZ units.

 

 

(h) Issue of Green Card after execution of Legal Undertaking by the unit.

 

 

(i) Import of second hand capital goods without age restrictions.

(j) Grant/renew Status Holder Certificate in respect of SEZ units provided it does not involve clubbing of FOB value of exports of its parent company in the DTA.

 

Exit from SEZ scheme

7.33.1

SEZ unit may opt out of the scheme with the approval of the Development Commissioner. Such exit from the scheme shall be subject to payment of applicable Customs and Excise duties on the imported and indigenous capital goods, raw materials etc. and finished goods in stock. In case the unit has not achieved positive NFE, the exit shall be subject to penalty, that may be imposed by the adjudicating authority under Foreign Trade (Development and Regulation) Act, 1992.

 

7.33.2

Broad conditions governing exit of units from the SEZ scheme are indicated at Appendix-14-IL.

 

7.33.3

In the event of a gem and jewellery unit ceasing its operation, gold and other precious metals, alloys, gem and other materials available for manufacture of jewellery, shall be handed over to an agency nominated by the Ministry of Commerce and Industry (Department of Commerce) at the price to be determined by that agency.

 

7.33.4

SEZ unit may also be permitted by the Development Commissioner, as one time option, to exit from SEZ scheme on payment of duty on capital goods under the prevailing EPCG Scheme, subject to the unit satisfying the eligibility criteria of that Scheme and standard conditions, as per paragraph above.

Depreciation norms for Capital goods

7.33.5

The depreciation upto 100% is permissible for computer and computer peripherals in 5 years and in case of others capital goods in 10 years, as per the norms notified by the Department of Revenue.

 

7.33.6

Depreciation for computers and computer peripherals shall be as follows:

10% for every quarter in the first year,

8% for every quarter in the 2nd year,

5% for every quarter in the 3rd year

1% for every quarter in the fourth and fifth year.

 

7.33.7

For capital goods, other than the above, the depreciation rate would be as follows:-

4% for every quarter in the first year;

3% for every quarter for the second and thrid year;

2.5% for every quarter for the fourth and fifth year; and

2% for every quarter thereafter.

 

7.33.8

Clearance of capital goods imported as second hand shall be allowed as per the Policy under EPCG Scheme. In respect of second hand capital goods which are less than 10 years old on date of import, clearance in the DTA may be allowed, on payment of applicable duties, after 2 years from the date of import. In addition, where the second hand capital goods are more than 10 years old, clearance in the DTA may be allowed only against an import licence and payment of applicable duties.

Revival of Sick units

7.34

Subject to a unit being declared sick by the appropriate authority, proposals for revival of the unit or its take over may be considered by the Board of Approval as per guidelines in Appendix-14-IM.