sez laws

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Laws and procedure relating to setting up of

SEZ,unit in SEZ ,OBU,FT&WZ and IFSC

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Agenda

Introduction

Procedure for Setting up SEZ

Procedure for Setting up SEZ Unit

Offshore Banking Unit

IFSC FT&WZ

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Some Definitions

Developer means a person who, or a StateGovernment which, has been granted by theCentral Government a letter of approval andincludes a an Authority and a Co-Developer

( Section 2(g) of SEZ Act ,2005)

Unit means a Unit set up by an entrepreneur

in a Special Economic Zone and includes anexisting Unit, an Offshore Banking Unit and aUnit in an International Financial ServicesCentre( Section 2(zc) of SEZ Act ,2005)

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Definition of person

person includes

an individual, whether resident in India or outside India,

a Hindu undivided family,

co-operative society,

a company, whether incorporated in India or outside India,

a firm,

proprietary concern, or

an association of persons or

body of individuals, whether incorporated or not, local authority and

any agency, office or branch owned or controlled by such individual,

Hindu undivided family, co-operative, association, body, authority or

company; ( Section 2(v) of SEZ Act, 2005)

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Setting up SEZ

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Procedure for setting up SEZ

-Sec 15Any person, who intends to set up a Special EconomicZone, may, after identifying the area make a proposal inForm A to either of the following

a)State Government concernedb) Board of Approval

25 Copies of Form A are to be given along with Projectreport outlining the economic and commercial viability ofthe project

No application fees

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Suo moto set up of SEZ

Central Government may:-

(a) after consulting the State Government

concerned;

(b) without referring the proposal for setting up the

Special Economic Zone to the Board; and

(c) after identifying the area;

suo moto set up and notify the Special Economic Zone

(Proviso to sub section 4 of section 3 of SEZ Act ,2005)

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Flow Chart for Setting up SEZ

SEZ can be formed in two ways

By Applying

to SGBy applying to

Board of Approval

SG forward theProposal to BOA

Obtain the

concurrence

of SG

BOA

approves the

proposal

SG=Sate

Government

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Flow Chart for Setting up SEZ

contd..

Central Government shall

issue letter of Approval to developer

Developer shall furnish to

Central Government information about area

Central Government will notify the area as SEZ

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Contents of Form A Location of SEZ Distance from the nearest Sea Port/Air Port/Rail or

Road

Details of Lease of Land

Proposed investment details Means of financing

Equity holdings

Details of areas (Processing areas and non-processing area) used for various purposes in SEZ

Activities Proposed in Processing and non-processing area

Details of employment likely to be generated

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Area requirements

Requirement laid down in Rule 5 in the SpecialEconomic Zones Rules

Due consideration given to whether SEZ is

1) Multi-product or sector specific

2) Located in special category states- Assam,Meghalaya, Nagaland, Arunachal Pradesh, Mizoram,Manipur, Tripura, Himachal Pradesh, Uttaranchal,

Sikkim, J&K, Goa or Union territory3) For special sector- IT, Gems & Jewellery, Bio-tech,

Non-conventional energy

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Kinds of SEZ

Kinds of SEZ

SEZ for

multi-product

SEZ for

specific sector

SEZ in a port or

airport

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Definitions of Kinds of SEZ

1) SEZ for multi-product means a SEZ where Units may be set upfor manufacture of two or more goods in a sector or goods fallingin two or more sectors or for trading and warehousing orrendering of two or more services in a sector or rendering ofservices falling in two or more sectors.(Rule 2(1)(za) of SEZ

Rules,2006 )2) SEZ for specific sector means a SEZ meant exclusively for one

or more products in a sector or one or more services in a sector (Rule 2(1)(zb) of SEZ Rules,2006 )

3) SEZ in a port or airport means a SEZ in an existing port orairport for manufacture of goods in two or more goods in sectoror goods falling in two or more sectors or for trading andwarehousing or rendering of services; (Rule 2(1)(zc) of SEZRules,2006 )

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Minimum Contiguous Area

RequirementType Area for specificstates/UT

Min.Processing

Area

Multi-product 1000 hectares 200 hectares 25 % (old)

35% (new)

( may be relaxedto 25% by CG on

Board

recommendation)

Multi -services 100 hectares 100 hectares 25%

Sector specific 100 hectares 50 hectares 50%Electronic

Hardware and

software

10 hectares( and

min. built up area of

1 lakh sq.mtrs)

10 hectares and


1 lakh sq.mtrs)

50%

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Requirement

Type Area for specific

states/UT

Min.Proces

sing Area

Bio- technology/

Non- conventional

energy

10 hectares (old)

10 hectares( with a min.

built up area of 40000

sq.m) (new)

10 hectares (old)

10 hectares( with a


40000 sq.m) (new)

50 %

Gems and jewellery

sector

10 hectares (old)

10 hectares( with a min.

built up area of 50000

sq.m) (new)

10 hectares (old)

10 hectares

( with a min. built up

area of 50000 sq.m)

(new)

50 %

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RequirementType Area for specific

states/UTMin.Processing Area

Free Trade and

Warehousing Zone

- Stand alone

40 hectares

(with 1 Lac square

meter built up area)

40 hectares

(with 1 Lac square

meter built up area)

50 %(new)

Free Trade and

Warehousing Zone

- SEZ for a specificsector

No minimum area

requirement but

subject to max areanot exceeding 20%

of the processing

area

No minimum area

requirement but

subject to max areanot exceeding 20%

of the processing

area

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SEZ Amendment

Rules,2006SPECIAL SECTOR

1. the area shall be ten hectares or more with a

minimum built-up area as under :(i) forty thousand square meters in case of a

Special Economic Zone proposed to be set up

exclusively for bio-technology and non-conventional

energy sectors including solar energyequipments/cells but excluding a Special Economic

Zone set up for non-conventional energy production

and manufacturing;

NEW

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SEZ Amendment

Rules,2006

(ii) fifty thousand square meters in case of a Special

Economic Zone proposed to be set up exclusively for

the gems and jewellery sector.

NEW

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SEZ Amendment Rules,2006

FREE TRADE AND WAREHOUSINGZONES

In a stand alone Free Trade and Warehousing Zone

at least fifty per cent of the area shall be earmarked

for developing processing area :

Provided furtherthat a Free Trade and

Warehousing Zone may also be set up as part of a

Special Economic Zone for multi-product;

NEW

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SEZ Amendment

Rules,2006Rule 5A. Infrastructure requirements relating to

information technology

In case of a Special Economic Zone relating toinformation technology, the following facilities shall

be ensured, namely :(a) twenty-four hours uninterrupted power

supply at stable frequency in thezone;

(b) reliable connectivity for uninterrupted andsecure data transmission;

(c) provision for central air-conditioningsystem and

(d) a ready to use, furnished plug and pay facility

for end users..

NEW

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Rule 18(4) (g)

No proposal shall be considered for:

the use of any plant or machinery

previously used for any purpose in

Domestic Tariff Area.

NEW

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Area conversion factors

1 Acre = 0.404686 Hectare

1 Hectare = 2.47109 Acres

1 Sq. Km. = 0.38610 Sq. Mile1 Sq. Km. = 100 Hectares

1 Sq. Mile = 2.58999 Sq. Kms

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Guidelines for Central Government for

notifying special Economic Zonesec 5

a) generation of additional economic activity

b) promotion of exports of goods and services;

c) promotion of investment from domestic and foreign

sources;d) creation of employment opportunities;

e) development of infrastructure facilities; and

f) maintenance of sovereignty and integrity of India, the

security of the State and friendly relations with foreignStates.

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Specific requirements for SEZ-

Rule 5(5)Before recommending any proposal for setting up ofa SEZ, the State Government endeavor that

following are made available in the State to the

proposed SEZ and Developer

a. exemption from the State and local taxes, levies and

duties

b. exemption from electricity duty or taxes on sale, of

self generated or purchased electric power

c. allow generation, transmission and distribution of

power within a SEZ

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Specific requirements for SEZ

Rule 5(5) .

d. providing water, electricity and such other services,

e. Delegation of power to the DevelopmentCommissioner under the Industrial Disputes Act, 1947and other related Acts in relation to the Unit

f. Declaration of the Special Economic Zone as a PublicUtility Service under the Industrial Disputes Act, 1947

g. Providing single point clearance system to theDeveloper and unit under the State Acts and rules

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Forms used Contd..

F Consolidated Application Form

G Format for letter of approval for Unit

H Bond-cum Legal Undertaking for SEZunit

I Annual Performance report for units

J Form for Appeal

K Permanent Identity Card

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Check list for the proposals to be

taken up by BOA

1) Name of the Developer.

2) Proposed area of the location of the SEZ.

3) Status of recommendation of the proposal by the State Government(if available).

4) Whether proposal is for formal or in-principle approval? (In caseland is in possession of the promoter, it is considered for formalapproval)

5) Is it a multi-product SEZ?

6) If it is a sector specific SEZ, the sector is.

7) Whether it meets the area requirements.

8) Area of the SEZ (in hectares)

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taken up by BOA

9) Whether Form- A has been filed?

10) Whether undertaking and affidavit has been submitted?

11) Whether project report has been submitted?

12) Whether land is owned/leased and is in possession of the Developer?13) Does the proposal meet the area requirements of the Rules?

14) Whether the land has existing structures or is vacant?

15) Whether the land is contiguous?

16) Projected investment in the project.

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taken up by BOA.

17) Projected exports from the project.

18) Projected employment from the project.

19) Share capital and Reserves of the Developer Company.

20) Source of funds for the project.21) Audited Accounts of the Developer for last 3 years (for all the

constituents in case the Developer is a SPV).

22) Extent of FDI

23) Source of FDI

24) Whether provisions contained in the Press Note No. 5 (2005

Series), issued by the Ministry of Commerce and Industry have been

followed in respect of Telecom/IT SEZ development?

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Processing and Non Processing

area The areas falling within the Special Economic Zones maybe demarcated by the Central Government 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; or

(c) the non-processing areas for activities other than those

specified under clause (a) or clause (b) ( Section 6 of SEZAct,2005)

The processing area and Free Trade and Warehousing Zoneshall be fully secured by boundary wall with specified entryand exit points.Rule 11(2) of SEZ Rules ,2006)

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Usage of Land in SEZ-Rule 11

The developer holding land on lease basis shall assignlease hold right to the entrepreneur holding valid Letter ofApproval.(Rule 11(6))

The lease period shall be co-terminus with the validity ofthe Letter of Approval.(Rule 11(5))

Developer may grant on lease land or built up space, forcreating facilities such as canteen, public telephone booths,first aid centres, creche and such other facilities as may be

required for the exclusive use of the Unit. .( Proviso toRule 11(5))

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Usage of Land in SEZ-Rule 11

The Developer may allot land in the processing area onlease basis to a person desiring to create infrastructurefacilities for use by the prospective Units. (Rule 11(8))

The Developer shall not sell the land in a SpecialEconomic Zone. (Rule 11(9))

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New Rule11(10)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 :

Providedthat the developer or co-developer may lease

the completed infrastructure along with the vacant

land appurtenant thereto for such purposes

Provided furtherthat infrastructure for business or

social purposes in the Special Economic Zone, as

may be approved by the Board, shall be eligible for

exemptions, concessions and drawback..

NEW

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Environmental Clearance

Any person who desires to undertake any new project in anypart of India or the expansion or modernization of anyexisting industry or project shall submit an application to the

Secretary, Ministry of Environment and Forests, New Delhi. The application will be accompanied by an Environmental

Impact Assessment Report, Environment Management Plan

Public hearing is not required in respect of units in SEZ

Only 30 categories of industries proposed to be established inSEZ need to take EIA approval like drugs ,Pesticides ,

Nuclear power Projects, Petrochemicals,Paper Pulp etc

(Environment impact assessment notification S.O.60(E),dated 27/01/1994)

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Setting up a SEZ Unit

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Definitions in Special EconomicZones Act,2005

Definitions Section

Unit 2(zc)

Offshore Banking Unit 2(u)

International Financial

Services Centre

2(q)

Entrepreneur 2(j)

Existing Unit 2(l )

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Definitions in Special Economic

Zones Act,2005

1) "Unit"means a Unit set up by an entrepreneur in aSpecial Economic Zone and includes an existing Unit, anOffshore Banking Unit and a Unit in an International

Financial Services Centre, whether established before orestablished after commencement of this Act (Section2(zc) of Special Economic Zones Act ,2005)

2) Offshore Banking Unitmeans a branch of a banklocated in a Special Economic Zone and which has

obtained the permission under clause (a) of sub-section(1) of section 23 of the Banking Regulation Act, 1949(Section 2(u) of Special Economic Zones Act ,2005)

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DEFINITIONS contd..

3) International Financial Services Centremeans anInternational Financial Services Centre which has beenapproved by the Central Government under sub-section

(1) of section 18 (Section 2(q) of Special EconomicZones Act ,2005)

4) entrepreneurmeans a person who has been granted aletter of approval by the Development Commissionerunder sub-section (9) of section 15 (Section 2(j) of

Special Economic Zones Act ,2005)5) existing Unitmeans 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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New and Existing Unit

New UnitAny person, who intends to set up a Unit for

carrying on the authorised operations in a Special

Economic Zone, may submit a proposal to the

Development Commissioner concerned Existing Unit An existing Unit shall be deemed to have

been set up in accordance with the provisions of SEZ

Act,2005 and such Units shall not require approval under

the SEZ Act, 2005 .(Section 15(1) of SEZ Act,2005)

Procedure for establishment of

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Unit ( if proposal not related to

Foreign collaboration and FDI)Application to Development Commissioner

with a copy to developer

Development Commissioner shall scrutinise

proposal and place before approval committee

Approval Committee approve the proposal

Development Commissioner will issue a letter of

approval in Form G for setting up the unit


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Unit ( if proposal relates to

Foreign collaboration and FDI)Application to Development Commissioner

with a copy to developer

Development Commissioner shall scrutinise

proposal and place before Board

Board shall approve the proposal

Development Commissioner will issue a letter of

approval in Form G for setting up the unit

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Letter of Approval to a Unit-Rule

19(2) and (3) An entrepreneur holding Letter of Approval shall only

be entitled to set up a Unit in processing area of the

Special Economic Zone or Free Trade and Warehousing

Zone, as the case may be:

The Letter of Approval shall specify interalia(i) items of manufacture

(ii)particulars of service, trading or warehousing activities

(iii) projected annual export for the first five years

(iv) projected Net Foreign Exchange Earning for the firstfive years of operations

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Validity period of Letter of

approval The Letter of Approval shall be valid for one year within

which period the Unit shall commence production or serviceor trading or Free Trade and Warehousing activity .(Rule19(4) of SEZ Rules ,2006)

Further extension may be granted by the DevelopmentCommissioner for valid reasons to be recorded in writing for afurther period not exceeding two years upon a request by theentrepreneur.( Proviso to Rule 19(4) of SEZ Rules ,2006)

The Development Commissioner may grant further extensionof one year subject to the condition that 2/3 rd of activitiesincluding construction, relating to the setting up of the Unit iscomplete and a chartered engineers certificate to this effect issubmitted.(Proviso to Rule 19 of SEZ Rules ,2006)

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Validity period of Letter of approval

after commencement of production

The Letter of Approval shall be valid for five years fromthe date of commencement of production or serviceactivity

It shall be construed as a licence for all purposes related toauthorized operations

After the completion of five years from the date ofcommencement of production, the Development

commissioner may, at the request of the Unit, extendvalidity of the Letter of Approval for a further period offive years, at a time.(Rule 19(6) of SEZ Rules ,2006)

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Foreign Companies in SEZ- Rule

19(7)

Foreign companies can also set up manufacturing units as

their branch operations in the Special Economic Zones in

accordance with the provisions of Foreign Exchange

Management (Foreign exchange derivatives contracts)Regulations, 2000.

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Some Contents of Project Report

Overview of the entire project Details of Activities proposed

Direct and indirect employment likely to be generated

Project cost and means of finance

Financial/Technical, etc. tie ups Details of Backward and Forward integrations

Details of Past experience

Infrastructure: About the Land, Factory premises,

Equipment, Office premises Risks associated with Project

Implementation schedule

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Matters that can be included in

application- Rule 17(1)

(a) Setting up of unit in a SEZ

(b) Annual permission for sub-contracting

(c) Allotment of Importer-Exporter Code number

(d) Allotment of land/industrial sheds in the SEZ

(e) Water connection

(f) Registration-cum-Membership Certificate

(g) Small Scale Industries Registration

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Matters that can be included in

application Rule 17(1) contd..

(h)Registration with Central Pollution Control Board

(i) Power connection

(j) Building approval plan

(k) Sales tax registration

(l) Approval from inspectorate of factories

(m) Pollution control clearance, wherever required;

(n) Any other approval as may be required from the StateGovernment

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Contents of Form F

Nature of industrial undertaking

Items of manufacture activity/service activity

Investment in Plant and machinery

Import and indigenous requirements of material and

other inputs Infrastructure requirements

Details of Foreign collaboration

Pattern of shareholding

Foreign Exchange Balance sheet for the 5 years Details of Industrial license or LOI/LOA under

SEZ/EOU /STP/EHTP Scheme

Details of sub-contracting in manufacturing operations

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Annexures with Application

(Form F)

DD of Rs 5000 in favour of Pay and Accounts Officer ofthe concerned SEZ

Project report giving details of activities proposed

Certificate of Incorporation, Articles of Association andMemorandum of Association in case of Company

Partnership deed in case of Partnerships firms

Affidavit

Proof of residence Income tax returns and audited Balance sheet for the last

three years

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Consideration of proposals-Rule

18(2)

1) Positive net foreign exchange earning

2) Availability of space and other infrastructure supportapplied for is confirmed by the Developer in writing, by

way of a provisional offer of space3) Applicant undertaking to fulfill the environmental and

pollution control norms

4) Applicant submitting proof of residence

5) Applicant submitting the Income tax returns, along withannexures, of the Proprietor or Partners, or in the case ofa company, audited balance sheet for the last three years

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Net Foreign Exchange

Earnings- Rule 53

The Unit shall achieve Positive Net Foreign Exchange to

be calculated cumulatively for a period of five years from

the commencement of production according to the

following formula, namely:- Positive Net Foreign Exchange = AB >0

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A Consists of

(d) supply of capital goods, accessories, tools, dies and such goods

which are used for installation purposes till the stage of

production and spares to the extent of ten per cent. of the free

on rail value to fertilizer plants;

(e) supply of goods to any project or purpose in respect of which

the Ministry of Finance, by a notification, permits the import of

such goods at zero customs duty;

(f) supply of goods to the power projects and refineries

(g) supply to projects funded by United Nations Agencies;(h) supply of goods to nuclear power projects through competitive

bidding as opposed to International Competitive Bidding;

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A Consists of

(i) supply made to bonded warehouses and free trade andwarehousing zones, where payment is received in foreignexchange;

(j) supply against special entitlements of duty free import of goodsunder the Foreign Trade Policy;

(k) export of services by services units including services renderedwithin Special Economic Zone or services rendered in theDomestic Tariff Area and paid for in free foreign exchange orsuch services rendered in Indian Rupees which are otherwiseconsidered as having been paid for in free foreign exchange by

the Reserve Bank of India;(l) supply of Information Technology Agreement items and

notified zero duty telecom or electronic items, namely, ColorDisplay Tubes for monitors and Deflection components forcolour monitors

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A Consists of

(m) supply to other units and Developers in the same or other

SEZ/EOU/EHTP/STP/BTP provided that such goods and

services are permissible for import or procurement by

such units and Developers;(n) supply of goods to Domestic Tariff Area against payment

in foreign exchange from the Exchange Earners Foreign

Currency account of the Domestic Tariff Area buyer or

Free Foreign Exchange received from overseas;(o) supply of goods against free foreign exchange by a Free

Trade and Warehousing Zone Unit;

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B Consist of

(a) sum total of the CIF Value of all imported inputs used forauthorized operations during the relevant period and theCIF value of all imported capital goods even though paid

for in Indian Rupees and the value of all payments madein foreign exchange by way of export commission,royalty, fees, dividends, interest on external commercial

borrowings during the first five year period or any othercharges;

(b) value of goods obtained from other Unit orEOU/EHTP/STP/BTP or from bonded warehouses or

procured from international exhibitions held in India orprecious metals procured from nominated agencies;

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B Consist of

(c)the CIF value of the goods and services, including prorataCost Insurance Freight of capital goods, imported dutyfree or leased from a leasing company or received free of

cost and or on loan basis or on transfer for the period theyremain with Unit;

(d) for annual calculation of Net Foreign Exchange, value ofimported capital goods and lump sum payment of foreigntechnical know-how fee shall be amortized at the rate of

ten per cent. every year from the first year to tenth year.

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Advance Licence

An Advance Licence is issued to allow duty

free import of inputs, which are physically

incorporated in the export product (making

normal allowance for wastage

Advance Licences are issued on the basis of

the inputs and export items given under

Standard Input Output Norms (SION).

F d ifi d b D f

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Funds notified by Department of

Economic affairs1. International Bank for Reconstruction and Development

(IBRD) and the International Development Association(IDA).

2. International Fund for Agricultural Development

(IFAD).

3. Asian Development Bank (ADB).

4. Organisation of Petroleum Exporting Countries (OPEC)Fund.

5. Yen credit channelised through Japan Bank forInternational Cooperation (JBIC). (Developmentcomponent only).

6. Swedish International Development Agency (SIDA).

S ifi i

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Sector specific requirements

Rule 18(3)

1) Export of high-grade iron ore, that is sixty-four per cent.

Fe and above, except iron ore of Goa origin and Redi

origin, which would be subject to approval of Board

2) No sub-contracting or job work of polyester yarn shallbe permitted in Domestic Tariff Area or in Export

Oriented Unit or Units in other Special Economic Zone:

Proposals not be considered-Rule

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oposa s ot be co s de ed u e

18(4)

a) Recycling of plastic scrap or waste

b) Enhancement of the approved import quantum ofplastic waste and scrap beyond the average annualimport quantum of the unit since its commencement

of operation to the existing Unitsc) Reprocessing of garments or used clothing or

secondary textiles materials and other recyclabletextile materials into clipping or rags or industrialwipers or shoddy wool or yarn or blankets or

shawlsd) Import of other used goods for recycling

P l t b id d R l

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Proposals not be considered-Rule

18(4) contd..

e) Export of Special Chemicals, Organisms, Materials,

Equipment and Technologies (SCOMET) unless it fulfils

the conditions indicated in the Import Trade Control

(Harmonized System) Classifications of export andimport items

f) if there is any instance of violation of law or public

policy by the promoters, having a bearing on the merits

of the proposal.g) the use of any plant or machinery previously used for

any purpose in Domestic Tariff Area

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SCOMET

The Director General of Foreign Trade specified a list ofSpecial Chemicals, Organisms, Materials, Equipment andTechnologies (SCOMET), the export of which is either

prohibited or permitted only under license.

The grant of license inter alia depends upon end-use cumend-user certification.

The SCOMET List is notified in the Export Policy inSchedule 2 Appendix 3 of the Indian Tariff Classification

(Harmonized System) - ITC(HS) Classifications of Exportand Import Items

U it f i id d t

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Units for services provided to

overseas entitiesRule 18(6)

Overseas Entity means a non-resident or a person offoreign origin and includes a company not incorporatedin India

Conditions

1) Capital goods, raw materials including consumables sub-assemblies,components, semi-finished goods shall besupplied by the Overseas Entity free of cost

2) Capital goods for setting up such facilities may also be

supplied on loan or lease basis

U it f i id d t

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Units for services provided to overseas

entities Rule 18(6) contd

3) Finished goods shall be exported out of the country ortransferred to the Customs Bonded Warehouse to bemaintained by the Overseas entity

4) The Unit shall receive the consideration for its

manufacturing services in convertible foreign exchangedirectly from the said overseas entity;

5) Separate accounts shall be maintained for themanufacturing and service activity in case the saidmanufacturing facility is used by the Unit for carrying

out production on its own account

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OFFSHORE BANKING UNITOFFSHORE BANKING

UNIT

S tti f Off h B ki

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Setting up of Offshore Banking

Unit-Rule 21

The application for setting up and operation of

Offshore Banking Unit in Special Economic Zone shall bemade to the Reserve Bank of India in the Form VI

prescribed under Banking Regulation (Companies) Rules,1949 under section 23 of the Banking Regulation Act,1949.

The terms and conditions subject to which an OffshoreBanking Unit may be set up and operated in a Special

Economic Zone shall be as specified in the Notificationnumber FEMA 71/2002-RB dated 7th September, 2002

by the Reserve Bank of India, as amended from time totime.

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Foreign Exchange Management (Offshore

Banking Unit) Regulations, 2002

The Offshore Banking Unit shall not be regarded as anauthorised dealer

An offshore Banking Unit may undertake foreignexchange transactions with any authorised dealer in Indiaonly on principal-to-principal basis.

An Offshore Banking Unit may undertake transaction inforeign exchange with a unit located in Special Economic

Zone to the extent the latter is eligible to enter into orundertake such transaction, within the ceilings and subjectto the conditions specified in the Regulations governingsuch transaction.

S h f S tti OBU i

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Scheme for Setting up OBU in

SEZ

The parent bank would be required to provide a minimumof US$ 10 million to its OBU.

OBUs would be exempt from CRR, SLR

Deposits of OBUs will not be covered by depositinsurance.

The OBUs would be required to scrupulously follow"Know Your Customer (KYC)" and other anti-moneylaundering instructions issued by RBI from time to time.

OBUs will be regulated and supervised by RBI throughits Exchange Control Department, Department of BankingOperations and Development and Department of BankingSupervision.

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IFSC AND FT&WZ

International Financial Services

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Centre (IFSC)- Sec 18

The Central Government may approve the setting up ofan International Financial Services Centre in a SpecialEconomic Zone and may prescribe the requirements forsetting up and operation of such Center:

The Central Government shall approve only one

International Financial Services Centre in a SpecialEconomic Zone.

The Central Government may, subject to such guidelinesas may be framed by the Reserve Bank, the Securitiesand Exchange Board of India, the Insurance Regulatoryand Development Authority and such other concernedauthorities, as it deems fit, prescribe the requirements forsetting up and the terms and conditions of the operationof Units in an International Financial Services Centre.

Free Trade and Warehousing

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Free Trade and Warehousing

Zones- Rule 5(2)(c)

Special Economic Zone for Free Trade and Warehousingshall have an area of forty hectares or more with a built uparea of not less than one lakh square meters

A Free Trade and Warehousing Zones may also be set upas part of a Special Economic Zone for multi-products

In a Special Economic Zone for a specific sector,

Free Trade and Warehousing Zone may be permitted withno minimum area requirement but subject to the condition

that the maximum area of such Free Trade andWarehousing Zone shall not exceed 20% of the processingarea.

Conditions applicable to

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Conditions applicable to

FT&WZ- Rule 18(5)

Units in FT&WZ shall be allowed to hold the goods onaccount of the foreign supplier for dispatches as per theownersinstructions and shall be allowed for trading withor without labeling, packing or repacking without any

processing:

These Units may also re-sell or re-invoice or re-export thegoods imported by them

All transactions by a Unit in Free Trade and Warehousing

Zone shall only be in convertible foreign currency

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Recent

developments in

Special economicZones

List of authorised operations

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eligible for approval by the Board

of Approval The Board of Approvals in its meeting held on 21st September, 2006

discussed and decided the procedure to be adopted by the Board of

Approval while approving infrastructure in the non-processing area of

the Special Economic Zones.

In this regard, the Central Government has notified a list of authorised

operations

This list would be used by the Board of Approval for authorizingoperations which only would qualify for exemptions, concessions and

drawback.

Criteria to be followed by the Board

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Criteria to be followed by the Board

for approval of SEZ Developers

1. Minimum Investment or Net worth of the Promoter Company & all

Group companies & Flagship companies as follows

a) Sector specific SEZs:

Minimum investment of Rs.250 crores or net worth of Rs.50crores

b) Multi product SEZs:

Minimum investment of Rs.1000 crores or net worth of Rs.250

crores2) Proposals not meeting the above minimum investment or net worth

criteria with enough justification for the same, to be considered on

merits by the Board of Approvals.

No SEZ on prime agriculture

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Land

The Centre has directed the states that mainly waste and barren land

and if necessary single crop agricultural land alone should be acquired

for the SEZ.

It has been further clarified that if perforce a portion of double-cropped

agricultural land has to be acquired to meet the minimum area

requirements, the same should not exceed 10% of the total land

required for the SEZs.

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THANKS

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