special economic zones in india 21311

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SEZs IN INDIA

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Structure

Part I: Evolution and Framework

Part II: Policy Features

Part III: Development Process

Part IV: Project Risks

Part V: Conclusions

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INDIANNESS of SEZ

PVT SECTOR DRIVEN

HYBRID OF CHINESE SEZ AND EPZ

KEY ROLE OF STATE GOVTS.

UNIQUE FISCAL REGIME:BY LAW

REGULATORY REGIME

EFFECTIVE AND EFFICIENTREGULATORY REGIME: SINGLEENFORCEMENT AGENCY

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SEZ Features (Cont’d) 

SINGLE COURT

LEGALFRAMEWORK: WINDOWS INEXISTING LAWS LEADING TO STATE& CENTRAL ACTS

SEZ REFORMS DRIVEN BYECONOMIC NEED & LOGIC

POLITICAL ENVIRONMENT

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SEZ POLICY

EVOLVED OVER LAST THREE YEARS

GOI AND RESPECTIVE STATES(12)

CENTRAL SEZ ACT READY SIX STATES HAVE ENACTED STATE

SEZ ACTs

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SEZ POLICY FRAMEWORK

Income Exemption

DDT/CG/MATCST/SERVICE TAX

STATE TAXES No license required for import.

Manufacturing, trading and services

allowed. Freedom to subcontract

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SEZ Policy Cont’d 

Single window approval by DC

No License required to manufactureitems reserved for SSI sector.

100% FDI allowed in manufacturingthrough automatic route except in a fewsectors.

No cap on foreign investments itemsreserved for SSI.

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SEZ Policy Cont’d 

Guidelines issued by RBI in Nov 2002for setting up Off-shore Banking Units inSEZs.

External commercial borrowings by unitsallowed without any maturity restrictions.

Freedom to bring in export proceedswithout any time limit

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SEZ Policy Cont’d 

100% of export proceeds in EEFCaccount.

Freedom to make overseas investmentfrom it.

Insurance outside India allowed

Capitalization of imports payable. Commodity hedging permitted.

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SEZ Policy Cont’d 

Foreign companies permitted to set upbranches for manufacturing activities

Exemption from interest rate surchargeon export finance.

SEZ allowed to write off unrealisedexport bills.

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Customs and Excise

Duty free import/domestic

procurement of goods for

development, operation andmaintenance of SEZ units.

Exemption to sales made from

Domestic Tariff Area to SEZ units.

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Income and Service Tax

100% IT exemption (10A) for first 5 years,

50% for 5 years thereafter and

50% of reinvestment for 10 years

Exemption from DDT, & MAT

Permitted to carry forward losses

OBUs allowed to have full IT exemption for 5

years and 80% thereafter Exemption from Service Tax to SEZ units.

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Environment

Permitted facilities like golf courses,desalination plants, hotels and non-polluting service industries in the

Coastal Regulation Zone area

Exemption from public hearing underEnvironment Impact Assessment

Notification

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Drugs and Cosmetics

Exemption from port restriction

under Drugs & Cosmetics Rules

Single window mechanism inZones having such units

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Companies Act

Office of Registrar of Companies inSEZs.

Exemption from requirement of domicileIndia for 12 months prior to appointmentas Director.

Enhanced limit of Rs. 2.4 crores perannum allowed for managerialremuneration

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Domestic Tariff Area (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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Development Process

LAND ACQUISITION

MIN AREA

MODULAR APPROACH INFRA/ ON SITE DEVELOPMENT

EXTERNAL INFRA LINKAGES

CO-DEVELOPERS

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Other Critical Policies

CUSTOMS

LABOUR

ENVIRONMENT POWER

FOREIGN EXCHANGE CONTROL

FOREIGN INVESTMENT LICENSING

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Project Risks

LOCATION

LAND ACQUISITION

REGULATORY REGIME-EFFECTIVENESS

STABILITY OF POLICY

FINANCIAL CLOSURE

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Thank You

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