Special Economic Zone

A UNIT IN A SPECIAL ECONOMIC ZONE

A “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 after the commencement of the Special Economic Zone Act, 2005.

PROCEDURE FOR SETTING UP A UNIT IN A SPECIAL ECONOMIC ZONE

APPLICATION PROCEDURE:

Any person may propose to set up a Unit for carrying on the authorized operations in a Special Economic Zone. An application for setting up of a Unit shall be made to the Development Commissioner. Such an application must seek clearances for the following:

· Setting up of unit in a Special Economic Zone;

· Annual permission for sub-contracting;

· Allotment of Importer-Exporter Code number;

· Allotment of land / industrial sheds in the Special Economic Zone;

· Water connection;

· Registration-cum-Membership Certificate;

· Small Scale Industries Registration;

· Registration with Central Pollution Control Board;

· Power connection;

· Building approval plan;

· Sales tax registration;

· Approval from inspectorate of factories;

· Pollution control clearance, wherever required;

· Any other approval as may be required from the Sate Government.

The application shall be made in 5 copies and a copy shall be sent to the Developer.

An application can also be made to the Development Commissioner for:

· seeking approval of foreign collaborations and foreign direct investments (including investments by a person resident outside India) in the Special Economic Zone for its development, operation and maintenance;

· seeking approval for the grant of a licence to an industrial undertaking which is established or proposed to be established in a Special Economic Zone, notwithstanding anything contained in the Industries (Development and Regulation) Act, 1951.

The industrial undertaking mentioned here, refers to the industrial undertaking as referred to in Section 3(d) of the Industries (Development and Regulation) Act, 1951.

You can download an Application Form for setting up a Unit in a Special Economic Zone (Form F) from: http://www.mepz.gov.in/content/downloads/Copy of APPLICATION FORM SEZUNIT.doc

REQUIREMENTS TO BE FULFILLED IN THE PROPOSAL:

A Proposal shall be approved by the Approval Committee upon fulfillment of the following requirements:

1. General Requirements:

it complies with the positive net foreign exchange earning requirement as provided in the Special Economic Zones Rules, 2006;

the availability of space and other infrastructure support applied for, is confirmed by the Developer in writing, by way of a provisional offer of space;

the applicant undertakes to comply with the applicable environmental and pollution control norms;

the applicant submits proof of residence to the satisfaction of the Development Commissioner. Such proof may be in the form of a passport, ration card, driving licence, voter identity card or any other proof of the proprietor or the partners of partnership firms or Directors of the Company;

the applicant submits the Income tax returns, along with annexures, of the Proprietor or Partners, or in the case of a company, audited balance sheet for the last 3 years.

2. Sector Specific Requirements:

export of high-grade iron ore that has an Iron content of 64% and above, except iron ore of Goa origin and Redi origin, which would be subject to Board approval;

no sub-contracting or job work of polyester yarn to be permitted in Domestic Tariff Area or in Export Oriented Unit or Units in other Special Economic Zone.

This restriction is not applicable to the Units intending to send the fabric, made by them out of polyester or texturised yarn, for subcontracting. However, third party exports are not permitted.

3. Activities Excluded from the Proposal:

A proposal for the following activities shall not be considered:

Recycling of plastic scrap or waste;

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;

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;

Import of other used goods for recycling;

Export of special Chemicals, Organisms, Materials, Equipment and Technologies unless it fulfils the conditions indicated in the Import Trade Control (Harmonized System) Classifications of export and import items;

Use of old plant and machinery previously used in Domestic Tariff Area.

4. Requirements for Units in Free Trade and Warehousing Zones:

· Units in such zones are allowed to hold the goods on account of the foreign supplier for dispatches in accordance with the owner’s instructions and may trade with or without labeling, packing or repacking without any processing;

· Such Units are also allowed to refrigerate for storage, and assemble Completely Knocked Down or Semi-Knocked Down kits;

· These Units may re-sell, re-invoice, or re-export the goods imported by them;

· All transactions by such Units shall only be in convertible foreign currency.

5. Requirements for Units set up for providing services to Overseas Entities:

Capital goods, raw materials including consumables sub-assemblies, components, semi-finished goods to be supplied by the Overseas Entity free of cost;

Capital goods for setting up such facilities may also be supplied on loan or lease basis (the notional value of such capital goods must be taken into account for calculating the Net Foreign Exchange Earnings as provided in the Special Economic Zones Rules, 2006);

Finished goods to be exported out of the country or transferred to the Customs Bonded Warehouse for being maintained by the Overseas entity, according to the instructions of the Overseas entity;
the Unit to receive the consideration for its manufacturing services in convertible foreign exchange directly from the said Overseas entity;

Separate accounts to be maintained for manufacturing and service activity undertaken by the Unit for carrying out production on its own account.

PROCESSING OF THE PROPOSAL:

1. By the Development Commissioner: After scrutinizing the proposal for setting up a Unit, the Development Commissioner shall submit it to the Approval Committee for its approval.

The following proposals shall be submitted by the Development Commissioner to the Board for its approval:

proposal seeking approval of foreign collaborations and foreign direct investments (including investments by a person resident outside India) in the Special Economic Zone for its development, operation and maintenance;

proposal seeking approval for the grant of a licence to an industrial undertaking which is established or proposed to be established in a Special Economic Zone, notwithstanding anything contained in the Industries (Development and Regulation) Act, 1951.

The industrial undertaking mentioned here, refers to the industrial undertaking as referred to in Section 3(d) of the Industries (Development and Regulation) Act, 1951.

2. By the Approval Committee: Within 15 days of the receipt of the proposal from the Development Commissioner, the Approval Committee may take any of the following actions:

· approve the proposal without modification;

· approve the proposal with modifications subject to certain terms and conditions imposed by it;

· reject the proposal if it does not meet the requirements, terms and conditions, obligations and entitlements as may be prescribed by the Central Government for a Unit to undertake the authorized operations.

3. By the Board: Within 45 days of the receipt of the proposal from the Development Commissioner, the Board shall approve the proposal with or without modification, or reject such proposal.

RECORDING OF THE REASONS:

In case of modification or rejection of a proposal, the Approval Committee or the Board, as the case may be, must record the reasons, in writing. The Development Commissioner by order shall communicate such reasons to the person making the proposal so that the person gets a reasonable opportunity of being heard.

LETTER OF APPROVAL:

On approval of a proposal by the Board or the Approval Committee, the Development Commissioner shall issue a Letter of Approval for setting up of the Unit. The letter shall specify the following:

the items of manufacture or particulars of service activity, including trading or warehousing;
projected annual export;
Net Foreign Exchange Earning for the first 5 years of operations;
limitations, if any on Domestic Tariff Area sale of finished goods, by-products and rejects;
other terms and conditions as stipulated by the Boar or Approval Committee.

VALIDITY / EXTENSION OF LETTER OF APPROVAL:

1. Validity for commencement of authorized operations:

The Letter of Approval shall be valid for 1 year within which period the Unit shall commence production, service, trading or Free Trade and Warehousing activity. The date of commencement of such production or activity must be communicated by the Unit to the Development Commissioner.

The validity of the Letter of Approval may be extended for further 2 years by the Development Commissioner for valid reasons to be recorded in writing.

A further extension of 1 year may be granted by the Development Commissioner, provided that two-thirds of activities including construction, is complete, for which the entrepreneur must submit a chartered engineer’s certificate.

2. Validity after commencement of authorized operations:

The Letter of Approval shall be valid for 5 years from the date of commencement of production or service activity. However, after the completion of 5 years, the Development Commissioner may, at the request of the Unit, extend the validity for a further period of 5 years, at a time.

CANCELLATION OF LETTER OF APPROVAL:

The Approval Committee may cancel the Letter of Approval if the entrepreneur persistently contravenes any of the terms and conditions or its obligations subject to which he had been granted the Letter of Approval. The entrepreneur shall be given a reasonable opportunity of being heard, prior to such cancellation.

EFFECT OF CANCELLATION:

The cancellation of the Letter of Approval shall result in the following:

· All exemptions, concessions, benefits or deductions shall be withdrawn from the Unit;

· The entrepreneur shall remit the exemption, concession, drawback and any other benefit availed by him in respect of the capital goods, finished goods lying in stock and unutilized raw materials relatable to his Unit.