ROLE OF SPECIAL ECONOMIC ZONE IN STRATEGIC PLANNNIG FOR BUSINESS UNIT ESTABLISHMENT

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By: SHIV RAJ MBA-MIET

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INTRODUCTION
Special Economic Zone (SEZ) is defined as "a

specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs".

Special Economic Zone is one or more areas of

a country where the tariffs and quotas are eliminated and bureaucratic requirements are lowered so that more companies are attracted to the area. The companies establishing in the 4/15/12 area also get extra incentives for doing business

Incentives and facilities offered to the SEZs

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include: Duty free import/domestic procurement of goods for

development, operation and maintenance of SEZ units

100% Income Tax exemption on export income for SEZ

units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.
Exemption from minimum alternate tax . External commercial borrowing by SEZ units upto US $

500 million in a year without any 4/15/12 maturity restriction

OBJECTIVES
To set up business unit in SEZ To know the procedure setting up business according

to govt. guidelines
To know the incentives and benefit getting from sez

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Positive Impacts
To Nation

World class business environment Increased FDI Higher economic growth Infrastructural development Export growth Employment Opportunities Exposure to technology and global markets

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Positive Impacts

TO Business houses

Hassle free operating environment window clearance procedure for setting up business.

Single

Simplified Duty Tax

free import

exemption- VAT, CST, ST, other levies commercial borrowings

External 100%

profit repatriation from export earnings

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Positive Impacts

To People
Employement Impact

opportunities

on lifestyle and standard of living infrastructure combined with social facilities

Business Better

work culture , good education, leadership vision

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SEZ Policy
Single window approval by DC No License SEZ Policy required to manufacture items

reserved for SSI sector.

100% FDI allow SEZ Policy with in manufacturing

through automatic route except in a few sectors.

No license required for import Manufacturing, trading and services allowed.

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SEZ Policy
Guidelines issued by RBI in Nov 2002 for setting up

Off-shore Banking Units in SEZs.

External commercial borrowings by units allowed

without any maturity restrictions. limit

Freedom to bring in export proceeds without any time 100% of export proceeds in EEFC account Freedom to make overseas investment from it

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SEZ Policy
Commodity hedging permitted Foreign companies permitted to set up branches for

manufacturing activities
Exemption from interest rate surcharge on export

finance
SEZ allowed to write off unrealised export bills

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Type of sez
Sector Specific SEZ-units may be set up for

manufacture of one or more goods in a sector rendering of one or more services in a sector
Multi-product SEZ-units may be set up for

manufacture of two or more goods in a sector or goods falling in two or more sectors trading and warehousing rendering of two or more services in a sector or services falling in two or more sectors
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SEZ in a port or airport means a SEZ in an existing port

or airport for manufacture of goods in two or more sector or goods falling in two or more sectors or for trading and warehousing or rendering of services

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Functional SEZs at present

At

present there are eight functional SEZs located at:

Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) & Nodia (Uttar Pradesh).
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Processing and non-processing areas:

The areas falling within the Special Economic Zones may be demarcated by the

Central Government or any authority specified by it as (a) the processing area for setting up Units for activities, being the manufacture

of goods, or rendering services; or

(b) the area exclusively for trading or warehousing purposes; (c) the non-processing areas for activities other than those specified under

clause (a) or clause (b) b). [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

The processing area and Free Trade and Warehousing Zone shall be fully secured by

boundary wall with specified entry and exit points. Rule 11(2) of SEZ Rules ,2006)

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Definitions in Special Economic Zones

Act,2005
1) "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.
2) Offshore Banking Unit means a branch of a bank

located in a Special Economic Zone

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Definitions
3) 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) of Special Economic Zones Act ,2005) 4) entrepreneur means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15 (Section 2(j) of Special Economic Zones Act ,2005) 5) existing Unit means every Unit which has been set up on or before the commencement of this Act (Section 2(l) of Special Economic Zones Act ,2005)
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Procedure to set up an SEZ Unit

To set up an SEZ Unit, copies of project proposal are

required to be submitted to the Development Commissioner who will forward the proposal to the Approval Committee submitted for the following approvals:

A consolidated application form is required to be

Allotment of Land / Industrial Sheds in SEZ Registration-cum-Membership certificate Annual permission for sub-contracting Allotment of Import Exporter Code Number Power connection
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Small Scale Industries registration Registration with the Central Insecticides Board Registration with Central Pollution Control Board Building approval Sales Tax registration Approval from the Inspectorate of Factories Pollution control clearance wherever required

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After submitting the application form and if

every thing is in order, Letter of Permission (LOP) is issued by the Zone Administration within 2 weeks after interview of the promoter by the Approval Committee.
Check list for the proposals to be taken

up by BOA

Name of the Developer. Proposed area of the location of the SEZ. Status of recommendation of the proposal by the State Government .
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Is it a multi-product SEZ? If it is a sector specific SEZ, the sector is. Whether it meets the area requirements. Area of the SEZ (in hectares)

Extent of FDI Source of FDI Projected exports from the project.

Projected employment from the project. Share capital and Reserves of the Developer Company. 4/15/12 Source of funds for the project.

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The Letter of Permission is valid for a period of three

years with in which the prospective investor is required to commence production.

After accepting lOP the unit should issue a letter

accepting terms & conditions of the LOP on its letter pad. undertaking to abide by the terms and conditions of the LOP has to be executed by the unit

A legal undertaking (LUT) in the prescribed form

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Green Card will be issued to the unit by the Zone

Administration after execution of the LUT. This will help the unit to clear the import consignment from various Ports, etc. (IEC), it will apply in the prescribed form (Aayaat Niryaat Form) to the Zone Administration for the same. Customs for obtaining the facilities of duty free import and excise - duty free procurement of indigenous goods of the raw material and capital goods required 4/15/12

If the unit does not have an Import Export Code

After obtaining LOP, the unit has to approach

After the approval from the Development

Commissioner concerned, the manufacturing and other activities have to be undertaken under customs bond for which formal application is to be made to the jurisdictional Assistant Commissioner / Central Excise for issuance of a Private Custom Bonded Warehouse Licence

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In last central Excise grant Registration Certificate

bearing 15 digit PAN based Registration Number . The Number would be automatically generated and sent back to the Development Commissioner for handing over to the concerned unit.

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THANK YOU
QUESTIONS SUGGESTIONS COMMENTS

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