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Special Economic Zones in India

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SEZ AND WORLD TRADE
SEZ exports in 2000 : 850 billion

• China : 45%

• Indonesia : 10%

• Philippines : 57%

• Costa Rica : 56%

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ROLE OF SEZS IN INDIAN ECONOMY
• to provide internationally competitive
environment

• to increase share in global exports

• to encourage FDI and enhance GDP

• to act as laboratories for changes in our
policies.

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OUR APPROACH

• Special fiscal regime, to attract private
investments for developers

• GOI and SG to develop the external
infrastructure

• Attractive facilities for setting up units

• Key role for State Government and private
sector in the development of SEZs

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OUR APPROACH (contd.)

• Deregulation and single window for State and
Central laws

• Legal framework : windows in existing laws
leading to Special Central and State
legislation for SEZ

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LEGAL AND POLICY FRAMEWORK-
AN UPDATE

• Developer of SEZ

• Units in SEZs

• DTA supplier

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DEVELOPER OF SEZ

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FACILITIES NOTIFIED FOR
DEVELOPERS OF SEZs
• 100% FDI allowed for:

(b) townships with residential, educational
and recreational facilities

(b) franchise for basic telephone service in
SEZ.

• Income Tax exemption to developers for
any block of 10 years in 15 years

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FACILITIES NOTIFIED FOR
DEVELOPERS OF SEZs (Contd)
• Duty free import/domestic procurement of
goods for development, operation and
maintenance of SEZs

• Exemption from Service Tax and the Central
Sales Tax

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FACILITIES NOTIFIED FOR
DEVELOPERS OF SEZs (Contd)
• Income of infrastructure capital fund/co.
from investment in SEZ exempt from Income
Tax

• Investment made by individuals etc in a SEZ
also eligible for exemption under section 88
of Income Tax Act

• Developer permitted to transfer
infrastructure facility for Operation and
Maintainence, inclusive of Income Tax
benefits

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FACILITIES NOTIFIED FOR
DEVELOPERS OF SEZs (Contd)
• Guidelines issued on generation, transmission and
distribution of power in SEZs

• Allocation of power to SEZs from central quota

• Freedom in allocation of space and built up area to
approved SEZ units on commercial basis.

• Authorised to provide and maintain services like
water, electricity, security, restaurants and
recreation centres on commercial lines.

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UNITS IN A SEZ

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FACILITIES NOTIFIED FOR
SEZ UNITS
• No license required for import.
• In addition to manufacturing, trading
and services also allowed.
• Freedom to subcontract.
• Single window approval by
Development Commissioner of the
zone.

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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)
• No license needed to manufacture items
reserved for SSI sector

• 100% FDI allowed in manufacturing
through automatic route except in sectors
such as defense, atomic energy.

• No cap on foreign investments for items
reserved for SSI.

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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)
Under FEMA

• 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.

• Freedom to bring in export proceeds
without any time limit
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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)

Under FEMA (contd.)

• Freedom to make overseas investment
• Insurance outside India allowed
• Capitalisation of import payables
• Commodity hedging permitted.
• Foreign cos permitted to set up
branches for manufacturing activities

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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)
Customs and Excise :
• Duty free import or domestic
procurement of goods for development,
operation and maintenance of SEZ units.

Central Sales Tax Act :
• Exemption to sales made from Domestic
Tariff Area to SEZ units.

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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)
Income Tax Act:
• 100% IT exemption (10A) for first 5 years,
50% for 2 years thereafter and 50% of
reinvestment for 3 years
• Permitted to carry forward losses
• Offshore Banking Units allowed to have full
IT exemption for 3 years and 50% for next
two years.
Service Tax:
• Exemption from Service Tax to SEZ units.

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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)
Environment
• Permitted facilities like golf
courses, de-salination plants,
hotels and non-polluting service
industries in the Coastal
Regulation Zone area

• Exemption from public hearing
under Environment Impact
Assessment Notification.

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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)
Drugs and Cosmetics :
• Exemption from port restriction
under Drugs & Cosmetics Rules

• Single window mechanism in
Zones having such units

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FACILITIES NOTIFIED FOR
SEZ UNITS (Contd.)
Companies Act :
• SEZ to have Regional office of Registrar of
Companies.

• Exemption from requirement of domicile in
India for 12 months prior to appointment
as Director.

• Enhanced limit of Rs. 2.4 crores per
annum allowed for managerial
remuneration

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FACILITIES NOTIFIED FOR
DTA SUPPLIER
Supplies from Domestic Tariff Area
(DTA) to SEZ to be treated as physical
export under IT, Customs and CST Act
DTA supplier entitled to :
• Drawback/DEPB
• CST Exemption
• Exemption from State levies
• Discharge of its EP
• IT exemption u/s 80HHC
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PROGRESS – STATE POLICY
• AP ,UP, Maharashtra, Madhya Pradesh, Gujarat ,
Karnataka , Rajasthan and TN announced SEZ
Policy.

• Enabling notifications issued by Maharashtra, MP,
AP, Rajasthan and UP

• UP and MP have enacted State SEZ Act ; Gujarat
and Maharashtra likely to do in near future

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FEATURES OF STATE SEZ POLICY:

• Exemption from state sales tax /VAT and other
state levies

• Exemption from electricity duty

• Single window approval for state level clearances

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FEATURE OF STATE SEZ POLICY
(Contd.)

• Declaration of Development Commissioner
as Labour Commissioner under the
Industrial Disputes Act.

• Simplification of returns and inspection
systems.

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COMMITMENTS FOR THE
IMMEDIATE FUTURE

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GOVERNMENT OF INDIA
• Enactment of Central SEZ Act
• Exemption of the SEZs from restrictive labour laws
• Facilitation of external infrastructure needs
• Special emphasis on sector specific and port based
SEZs

• Domestic and External marketing of SEZs

• Working with State Governments for State
SEZ legislation

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PROGRESS-PHYSICAL
All 8 EPZs converted into SEZs :-

• Kandla ( Gujarat) : 1965 (625 Acres)
• Seepz( Maharashtra) : 1975 (110 Acres)
• Noida (U P) : 1986 (310 Acres)
• Madras ( T N) : 1986 (262 Acres)
• Cochin ( Kerala ) : 1986 (103 Acres)
• Falta ( W B) : 1986 (280 Acres)
• Visakhapatnam( AP) : 1994 (360 Acres)
• Surat ( Gujarat ) : 1998 (103 Acres)
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PROGRESS-PHYSICAL (contd)

Formal Approvals Given to SEZs

• Indore ( Madhya Pradesh)

• Navi-Mumbai (Maharashtra)

• Sitapura (Jaipur)

• Positra (Gujarat)

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15 SEZ approved in principle:
• Maha-Mumbai ( Maharashtra )
• Vallarpadam/Puthuvypeen (Kerala)
• Moradabad (U.P.)
• Jodhpur(Rajasthan)
• Nangunery ( T N)
• Paradeep & Gopalpur (Orissa)
• Kulpi and Salt Lake (W B)
• Bhadohi, Kanpur, Greater NOIDA
• Visakhapatnam and Kakinada, (A P)
• Hassan ( Karnataka)
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FOR DETAILS VISIT
WWW.SEZINDIA.NIC.IN

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THANK YOU

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