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Special Economic Zone Policy

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  • Overview
  • Objectives
  • Eligibility Criteria
  • Incentives
  • Statistics
  • Notifications
  • FAQs

Overview

To attract foreign direct investment, promote export and generate employment in the country, the State Government has announced a policy for setting up Special Economic Zone, vide G.R. dated 12.10.2001 and subsequently, Central Government has enacted SEZ Act, 2005.

Definition of 'Special Economic Zone - SEZ':
  • Special Economic Zone (SEZ) is a specifically delineated duty free enclave with all required infrastructure provided under single administrative umbrella primarily meant for locating industries which manufacture and export goods and services
  • These enclaves shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs
  • Every unit in SEZ should be positive net foreign exchange earner
Who can set up SEZs?
  • Special Economic Zone can be established either by Central Government ,State Government or its agencies, private/public/joint sector or any person for manufacture of goods or rendering services or for both or as a free trade and warehousing zone
  • To establish sector specific SEZ minimum investment should be 250 Crores or net worth should be 50 Crores
  • To establish multi product SEZ minimum investment should be 1000 Crores or net worth should be 250 Crores

Objectives

The main objectives of SEZ Policy are as follows:

  • Generation of additional economic activity
  • Promotion of exports of goods and services
  • Promotion of investment from domestic and foreign sources
  • Creation of employment opportunities
  • Development of infrastructure facilities

Eligibility Criteria

Minimum area required for different categories of Special Economic Zone:

As per modified guidelines of Government of India, Multi-product SEZ is required to have minimum 500 Ha. area, whereas multi-services SEZ 100 Ha. and sector-specific SEZ should have minimum 50 Ha. area. No minimum land requirement for setting up an IT/ITES SEZ. Only the minimum built up area (BUA) required in 7 major cities viz. Mumbai, Delhi (NCR), Hyderabad, Banglore, Pune & Kolkata is 1 Lakh sq.mtrs. For B category cities it is 50000 sq. mtrs. & for remaining cities only 25000 sq. mtrs. built up area (BUA) is required. For, Food Processing SEZ based on agriculture, minimum land required is 10 Ha.

Incentives

As per the provisions of SEZ Act, 2005 of Government of India, the maximum area allowed for non-processing activities is 50% of the total area. In Annual Supplement of year 2013-14 to the Foreign Trade Policy, 2009-2014 announced by Minister for Commerce, Industry & Textiles, on 18.04.2013, it has been decided to permit transfer of ownership of SEZ units, including sale.

The Government of Maharashtra has issued G. R. on 15th October 2011, under which developers of SEZ and units therein are eligible for fiscal benefits such as, timely reimbursement of VAT paid, exemption from payment of Non-Agriculture Tax & royalty on minor minerals.

The proposed bill for Special Economic Zones & Designated Zones – 2010 of the State is submitted to the assembly and the said bill was not passed. The Bill lapsed in April 2012.

Statistics

In Maharashtra State, following 139 SEZ projects have been approved by Government of India. Statistical data of these SEZs (as per proposals submitted by SEZ Developers) as on 30.06.2015 is as below:

Form of Approval Approved
(Numbers)
Area
(Hectares)
Investment
(₹ Crores)
Employment
(Numbers)
Notified SEZ 70 9553.32 81817.28 2368210
Formally Approved SEZ 50 3876.61 32814.95 2209268
In-principally Approved SEZ 19 11383.81 37569.53 1026260
Total 139 24813.74 152201.76 5603738

Out of these 139 SEZs approved by Government of India, 69 notified / formally approved / in-principally approved SEZs have been de-notified / withdrawn by the developers, due to market conditions.

De-notification / Withdrawal Approved
(Numbers)
Area
(Hectares)
Investment
(₹ Crores)
Employment
(Numbers)
De-notified SEZs 19 2971.25 7049.17 309360
Withdrawn SEZs

a) Formally Approved SEZ
40 3328.01 27663.88 1967065
b) In-principally Approved SEZ 10 3790.27 18600.80 262200
Sub-Total (a+b) 50 7118.28 46264.68 2229265
Total 69 10089.53 53313.85 2538625

The break-up of approved 70 SEZs, remaining after withdrawal / de-notification of 69 SEZs is as below:

Form of Approval Approved
(Numbers)
Area
(Hectares)
Investment
(₹ Crores)
Employment
(Numbers)
Notified SEZ 51 6582.07 74768.11 2058850
Formally Approved SEZ 10 548.60 5151.07 242203
In-principally Approved SEZ 09 7593.54 18968.73 764060
Total 70 14724.21 98887.91 3065113

Out of the above 51 Notified SEZs in the state, 25 SEZs are Operational SEZs. The details of which are as under:

No of Operational SEZs Area
(Hectares)
Functioning Units in Operational SEZ Investment
(₹ Crores)
Employment
(Numbers)
25* 3059.09 593 32255.30 359839

(*) Out of these SEEPZ is not in the list of notified SEZs. So, if we exclude it, the operational SEZs are 24 out of 51 notified SEZs.


593 new units are functioning in the 25 operational SEZs. The total investment done by the developers and the units set-up in these SEZs is about ₹ 32255.30 Crs. & employment generated is to the tune of 359839. Out of 51 SEZs, the developers of the 27 SEZs (excluding 24 Operational SEZs) are engaged in execution of the project or in obtaining various permissions, NOCs from relevant authorities and also in process of executing agreements with the foreign investors within the specific time period given to them by the government. Thus there is continuous progress in the development of Special Economic Zones that are approved by Government of India.

As per modified guidelines of Government of India, Multi-product SEZ is required to have minimum 500 Ha. area, whereas multi-services SEZ 100 Ha. and sector-specific SEZ should have minimum 50 Ha. area. No minimum land requirement for setting up an IT/ITES SEZ. Only the minimum build up area (BUA) required in 7 major cities viz. Mumbai, Delhi (NCR), Hyderabad, Banglore, Pune & kolkata is ₹ 1 Lakh sq.mtrs. For B category cities it is 50000 sq. mtrs. & for remaining cities only 25000 sq. mtrs. built up area (BUA) is required. For, Food Processing SEZ based on agriculture, minimum land required is 10 Ha.

The classification of 70 approved SEZs, is as below:

Type of SEZ Approved
(Numbers)
Area*
(Hectares)
Investment*
(₹ Crores)
Employment*
(Numbers)
Multi-Product SEZ 06 10821.05 39133.00 1162409
Multi-Services SEZs 04 544.97 1585.03 154321
Sector Specific SEZ 13 1781.60 34989.00 208730
Electronics, Hardware, Software and IT services SEZ 30 806.47 14054.81 1029817
Gems & Jewellery SEZ 04 195.58 1702.03 134850
Biotechnology SEZ 08 194.23 4192.26 161903
Non-Conventional Energy SEZ 00 00 00 00
Free Trade and Ware Housing Zone SEZ 04 180.32 2831.78 208083
Agro Based Food Processing SEZ 01 200.00 400.00 5000
Total 70 14724.22 98887.91 3065113

*Figures as per project submitted by the developer.

The classification of 25 operational SEZs in the state, is as below:

Type of SEZ Approved
(Numbers)
Unit
(Numbers)
Area*
(Hectares)
Investment*
(₹ Crores)
Employment*
(Numbers)
Multi-Product SEZ 03 325 1697.16 3722.34 1090
Sector Specific SEZ 06 13 610.94 2781.24 3606
Electronics, Hardware, Software and IT services SEZ 14 205 603.76 10988.1 229917
Free Trade and Ware Housing Zone SEZ 01 49 45.76 1504.22 216
Power 01 01 101.47 113.21 230
Total 25 593 3059.09 32255.30 359839

*Figures as per information provided by DC (SEEPZ), Mumbai and the developers of SEZ.


GR's and Notifications
GR MIHAN 15.10.2011 View Details
GR Stamp Duty Registration 02.03.2007 View Details
GR Stamp Duty Registration Corrigendum 12.03.2007 View Details
GR State Government’s Policy regarding setting up of SEZ in Maharashtra View Details

Frequently Asked Questions - SEZ Policy

What is a Special Economic Zone?

Special Economic Zone (SEZ) is a specifically delineated duty free enclave with all required infrastructure provided under single administrative umbrella primarily meant for locating industries which manufacture and export goods and services. These enclaves shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.

Who can set up SEZs?

Under section 3, a Special Economic Zone can be established either by Central Government ,State Government or its agencies, private/public/joint sector or any personfor manufacture of goods or rendering services or for both or as a free trade and warehousing zone.

What is the process involved in establishment of an SEZ?
  • A Developer / An Entrepreneur who is willing to start SEZ needs to locate the area with the minimum land requirement as per SEZ -2006 Rule 5(2) i.e. No minimum land requirement for setting up an for IT/ITES SEZ, Minimum (40 hectares) for Free Trade & Warehousing Zone and for Multi Services (100 hectares) & for Multi product (500 hectares), Sector specific Minimum (50 hectares) SEZ, Only the Minimum build up area (BUA) required in 7 major cities viz. Mumbai, Delhi (NCR), Hyderabad, Banglore, Pune & Kolkata is 1 Lakh sq.mtrs. For B category cities it is 50000 sq. mtrs. & for remaining cities only 25000 sq.mtrs. built up area (BUA) is required, For Food Processing SEZ based on agriculture, minimum land required is 10 hectares
  • After identifying the area an applicant needs to be submitted in Form A to the State Government (Rule 3) indicating name and address of the applicant, status of the promoter along with a project report covering the following particulars
  • Location of the proposed Zone with details of existing infrastructure and that proposed to be established
  • Its area, distance from the nearest sea port / airport / rail / road head etc.
  • Financial details, including investment proposed mode of financing and viability of the project.
  • Details of foreign equity and repatriation of dividends etc., if any
  • Whether the Zone will allow only certain specific industries or will be a multi-product Zone.
  • The State Government while recommending the proposal shall commit to provide the facilities and incentives such as exemption from state and local levies, exemption from electricity duty, Single Window Clearance under the state laws, etc. as provided in sub-rule (5) of Rule 5 of the SEZ Rules 2006.
  • The State Government has to forward the proposal with its recommendations within 45 days from the date of receipt of such proposal from the developer to the Board of Approval (BoA) addressed to Director(SEZ)/Deputy Secretary, Department of Commerce, Udyog Bhavan, New Delhi.
  • The Developer also has the option to submit the proposal in Form A directly to the Board of Approval via Director(SEZ)/Deputy Secretary, Department of Commerce, Udyog Bhavan, New Delhi., in such cases the applicant (Developer/Entrepreneur) shall have to obtain the concurrence of the State Government within 6 months from the date of such approval.
  • After approval by the Board, the Department of Commerce issues Letter of Approval (LoA) to the applicant (Developer/Entrepreneur) for establishment of SEZ (Rule 6).
  • After receipt of the Letter of Approval (LoA) and on submission of details of the land with proof of ownership /leasehold rights of the land, possession certificate and non- encumbrance certificate duly certified by the district revenue authorities and on inspection by the jurisdictional DC, Department of Commerce, shall notify the area as an SEZ (Rule 7 and 8).
  • The applicant is required to submit details of the authorized operations proposed to be undertaken in the SEZ so as to obtain authorization for the same from the Board of Approval (BoA).Exemptions of duties and taxes are extended only for the authorized operations.
  • Procurement of goods for development of SEZ (for developer only) for authorized operations shall be approved by the Approval Committee at the Zone Level on the basis which goods can be procured without payment of customs duty and excise duty by the developer.
What is a processing and non-processing area?
  • A processing area is that area of an SEZ where units can be located for manufacture of goods or rendering of services. At least 50% of the area shall be earmarked for developing the processing.
  • The non-processing area is the area which is intended to provide support facilities to the SEZ processing area activities and may include commercial and social amenities/infrastructure.
Who can be a Co-developer?

The infrastructure facilities of the SEZ’s are normally to be developed by the developer. The developer if desires, that certain facilities or portion of the SEZ to be developed by another person then the developer can ask the person to file an application with Board of Approval to be considered as a Co-developer . For this the consent of the developer is must. There has to be MoU between Developer and Co-developer and the copy of the same has to be submitted to BoA along with the application of the Co-developer.

What are the facilities Incentive / Facilities to SEZ Developer?
  • 100% FDI allowed for:
    1. Townships with residential, educational and recreational facilities on a case to case basis,
    2. franchise for basic telephone service in SEZ.
  • Income Tax benefit under (80 IA) to developers for any block of 10 years in 15 years
  • Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs.
  • Exemption from Service Tax /CST.
  • Income of infrastructure capital fund/co. from investment in SEZ exempt from Income Tax
  • Investment made by individuals etc in a SEZ co also eligible for exemption u/s 88 of IT Act
  • Developer permitted to transfer infrastructure facility for operation and maintenance.
  • Generation, transmission and distribution of power in SEZs allowed
  • Full freedom in allocation of space and built up area to approved SEZ units on commercial basis.
  • Authorized to provide and maintain service like water, electricity, security, restaurants and recreation centers on commercial lines.
How to set up a unit in SEZ?

For setting up a manufacturing, trading or service units in SEZ, 3 copies of project proposal in the format prescribed at Appendix - IA of the Handbook of Procedures, Vol.1 to be submitted to the Development Commissioner of the SEZ.

How many units can be allowed in a SEZ?

There is no restriction on the number of units in the SEZ Act. The space availability depends on the floor space index (FSI) available on that area and Developers capacity to construct.

What is the approval mechanism for the units?

All approvals to be given by the Unit Approval Committee headed by the Development Commissioner. Clearance from the Department of Policy and Promotion/Board of Approvals, wherever required will be obtained by the Development Commissioner, before the Letter of Intent is issued.

What are the incentive/facilities available for SEZ units?

Following incentive/ facilities to SEZ enterprises:

Customs and Excise:

  • SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any licence or specific approval.
  • Duty free import/domestic procurement of goods for setting up of SEZ units.
  • Goods imported/procured locally duty free could be utilized over the approval period of 5 years.
  • Domestic sales by SEZ units will now be exempt from SAD.
  • Domestic sale of finished products, by-products on payment of applicable Custom duty.
  • Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value.

Income tax:

  • Physical export benefit
  • 100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
  • Reinvestment allowance to the extend of 50% of ploughed back profits
  • Carry forward of losses

Foreign Direct Investment:

  • 100% foreign direct investment is under the automatic route is allowed in manufacturing sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes , cigars and manufactured tobacco substitutes.
  • No cap on foreign investments for SSI reserved items.

Banking / Insurance/ External Commercial Borrowings

  • Setting up Off-shore Banking Units allowed in SEZs. OBU's allowed 100% Income Tax exemption on profit for 3 years and 50% for next two years.
  • External commercial borrowings by units up to $ 500 million a year allowed without any maturity restrictions.
  • Freedom to bring in export proceeds without any time limit.
  • Flexibility to keep 100% of export proceeds in EEFC account. Freedom to make overseas investment from it.
  • Commodity hedging permitted.
  • Exemption from interest rate surcharge on import finance.
  • SEZ units allowed to 'write-off' unrealized export bills.

Central Sales Tax Act:

  • Exemption to sales made from Domestic Tariff Area to SEZ units.
  • Income Tax Act

Service Tax:

  • Exemption from Service Tax to SEZ units

Environment:

  • SEZs permitted to have non-polluting industries in IT and facilities like golf courses, desalination plants, hotels and non-polluting service industries in the Coastal Regulation Zone area
  • Exemption from public hearing under Environment Impact Assessment Notification

Companies Act:

  • Enhanced limit of ₹ 2.4 Crores per annum allowed for managerial remuneration
  • Agreement to opening of Regional office of Registrar of Companies in SEZs.
  • Exemption from requirement of domicile in India for 12 months prior to appointment as Director.

Drugs and Cosmetics:

  • Exemption from port restriction under Drugs & Cosmetics Rules.

Sub-Contracting/Contract Farming:

  • SEZ units may sub-contract part of production or production process through units in the Domestic Tariff Area or through other EOU/SEZ units
  • SEZ units may also sub-contract part of their production process abroad.
  • Agriculture/Horticulture processing SEZ units allowed to provide inputs and equipments to contract farmers in DTA to promote production of goods as per the requirement of importing countries
Whether SEZs have been exempted from Labour laws?

Normal Labour Laws are applicable to SEZs, which are enforced by the respective state Governments. The states Government have been requested to simplify the procedures/returns and for introduction of a single window clearance mechanism by delegating appropriate powers to Development Commissioners of SEZs.

What are the facilities for Domestic suppliers to Special Economic Zone?

Supplies from Domestic Tariff Area (DTA) to SEZ to be treated as physical export. DTA supplier would be entitled to:

  • Drawback/DEPB
  • CST Exemption
  • Exemption from State Levies
  • Discharge of EP if any on the suppliers
  • Income Tax benefits as applicable to physical export under section 80 HHC of the Income Tax Act.
Who monitor the functioning of the units in SEZ?

Performance of the SEZ units monitored by a Unit Approval Committee consisting of Development Commissioner, Custom and representative of State Govt. on annual basis.

Are SEZ's controlled by Government?

In all SEZ’s, the statutory functions are controlled by the Government. Government also controls the operation and maintenance function in the 7 Central Government controlled SEZs. In rest of the operation and maintenance are privatized.

What are the special features if we come to the zone?

The units would be entitled for a package of Incentives and a simplified operating environment.

What about the Licenses for Imports?

No License is required for imports, including second hand machineries.

What is the practical role of Development Commissioner (SEZ)?

Development Commissioner is the nodal officer for SEZs and help in resolution of problem, if any, faced by the units / developer.

Content owned by Directorate of Industries, Government of Maharashtra. Last Updated On: 11.02.2016