special economic zones in india 21311

8/4/2019 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



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



SEZ Features (Cont’d)

SINGLE COURT

LEGALFRAMEWORK: WINDOWS INEXISTING LAWS LEADING TO STATE& CENTRAL ACTS

SEZ REFORMS DRIVEN BYECONOMIC NEED & LOGIC

POLITICAL ENVIRONMENT



SEZ POLICY

EVOLVED OVER LAST THREE YEARS

GOI AND RESPECTIVE STATES(12)

CENTRAL SEZ ACT READY SIX STATES HAVE ENACTED STATE

SEZ ACTs



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



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.



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



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.



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.



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.



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.



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



Drugs and Cosmetics

Exemption from port restriction

under Drugs & Cosmetics Rules

Single window mechanism inZones having such units



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



Domestic Tariff Area (DTA) supplier

Entitled to: Drawback/DEPB

CST Exemption

Exemption from State levies Discharge of its EP

IT exemption u/s 80HHC



Development Process

LAND ACQUISITION

MIN AREA

MODULAR APPROACH INFRA/ ON SITE DEVELOPMENT

EXTERNAL INFRA LINKAGES

CO-DEVELOPERS



Other Critical Policies

CUSTOMS

LABOUR

ENVIRONMENT POWER

FOREIGN EXCHANGE CONTROL

FOREIGN INVESTMENT LICENSING



Project Risks

LOCATION

LAND ACQUISITION

REGULATORY REGIME-EFFECTIVENESS

STABILITY OF POLICY

FINANCIAL CLOSURE



Thank You

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special economic zones in india 21311

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