Sez PDF
Sez PDF
Sez PDF
Special Economic
KOCHHAR & CO.
Zones A U G U S T 2 0 0 6
INTRODUCTION
SETTING UP OF SEZ
SEZs are notified by the Ministry of Commerce and can be set up by private developers or by
Central / State Governments or jointly by any two or more of the above. SEZs are required to
have a minimum area of 1,000 hectares of land.
SPECIAL ECONOMIC ZONES (SEZs)
KOCHHAR & CO.
• A 10-year tax holiday (i.e. a tax holiday for any consecutive block of 10 years in
the first 15 years of operation) has been provided for undertakings involved in
developing and/or operating and/or maintaining notified SEZs before March 31,
2006.
• Full freedom in allocation of space and built up area for approved SEZ units on
commercial basis.
ADVANTAGES
The SEZ Act also provides a number of incentives to units proposed to be set up in SEZs.
SEZ units may be set up for carrying on manufacturing, trading or service activity. A unit set
up in SEZ has the following facilities and incentives:
15 year corporate tax holiday on export profit – 100% for initial 5 years, 50% for the next 5 years
and up to 50% for the balance 5 years equivalent to profits ploughed back for investment.
Allowed to carry forward losses.
No licence required for import.
Duty free import/domestic procurement of goods for setting up of the SEZ units.
Goods imported/procured locally are duty free and could be utilised over the approval period of 5
years.
Exemption from customs duty on import of capital goods, raw materials, consumables, spares,
etc.
Exemption from Central Excise duty on the procurement of capital goods, raw materials,
consumable spares, etc. from the domestic market.
Exemption from payment of Central Sales Tax on the sale or purchase of goods, provided that,
the goods are meant for undertaking authorized operations.
Exemption from payment of Service Tax.
The sale of goods or merchandise that is manufactured outside the SEZ (i.e, in DTA) and which is
purchased by the Unit (situated in the SEZ) is eligible for deduction and such sale would be
deemed to be exports.
The SEZ unit is permitted to realise and repatriate to India the full export value of goods or
software within a period of twelve months from the date of export.
“Write-off” of unrealized export bills is permitted up to an annual limit of 5% of their average
annual realization.
• No routine examination by Customs officials of export and import cargo.
• Setting up Off-shore Banking Units (OBU) allowed in SEZs.
• OBU's allowed 100% income tax exemption on profit earned for three years and
• 50 % for next two years.
SPECIAL ECONOMIC ZONES (SEZs)
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ADVANTAGES
DISADVANTAGES
• Most players are interested in setting up SEZ’s with an eye on the real estate bounty so that they can
acquire at cheap rates and create a land bank for themselves.
• The number of units applying for setting up EOU’s is not commensurate to the number of
applications for setting up SEZ’s leading to a belief that this project may not match up to
expectations.
At present there are fourteen functional SEZs located at Santa Cruz (Maharashtra),
Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam
(Andhra Pradesh), Falta and Salt Lake (West Bengal), Nodia (Uttar Pradesh), Indore
(Madhya Pradesh), Jaipur (Rajasthan), etc. In view of the tremendous investment
opportunities and attractive incentives available to SEZs, corporate giants have now
stepped in to establish SEZs all over the country. One of the earliest examples of this is
the Mahindra World City at Chennai. The SEZ was promoted by Mahindra & Mahindra
Ltd and the Tamil Nadu Industrial Development Corporation. Mahindra & Mahindra
Ltd holds 89% equity in the same. On June 19th 2006, Reliance Industries signed a pact
with the Haryana government for setting up of the Rs. 25,000 crore multi-product SEZ
near Gurgaon.
SPECIAL ECONOMIC ZONES (SEZs)
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FACT FILE:
Special Economic Zones (SEZ)
Proposals are in the pipeline, awaiting a nod from the 19-
member Board of Approval or BoA. There is no objective
criteria for approval, and the same is granted on a case-
120 to–case basis taking into account the financial strength of
the promoter. BoA decisions are based on consensus and
not on majority. New proposals continue to be accepted
now.
Developer Area
(hectares)
Kakinada SEZ, Andhra 4,134
Gujarat Adani port 2,658
Gujarat Industrial Devt Corp 1,768
Mundra SEZ, Gujarat 1,082
Essar Hazira SEZ 1,100
Maharashtra Industrial Devt
1,010
Corp
Area
Developer Sector
(hectares)
Reliance 440
Petroleumand Petrochem
Infrastructure
MIDC Textile 383
MIDC Agro 200
MIDC Automobile &related activities 210
MIDC Textile 208
Claridges Hotels Multi-services 242
CPL infra
Pharma 200
Ahmedabad
Karnataka
Engineering &
Industrial Areas 167
Related
Devt Board
MIDC Pharma 150
Electronics,
SIPCOT
Telecom 120
(Tamil Nadu)
Hardware etc
Area
Developer/proposed location
(hectares)
Infosys-Karnataka 125
MIDC-Pune 229
Karnataka Industrial Areas Devt Board-
203
Mangalore
Sanghi Industries-Andhra 202
Electronics Corp of TN- Chennai 159
ETL Infrastructure-Kanchipuram 105
Flextronics-Chennai 101
MIDC-Pune 82
Tata Consultancy Services-Chennai 71
Over the course of the next year, it is anticipated that there will be investment of close to Rs
100,000 crore in about 148 SEZs proposed to be set up around the country. Apart from the
primary attraction of the tax benefits that are offered to SEZs, the Government is also
proposing to introduce fresh incentives such as single window clearance for customs and excise
duty, relaxation from various labour law regulations, allowing companies in the SEZ to
conduct board meetings via video conferencing by amending the Companies Act, 1956, thus
making SEZs the next big investment and growth opportunity for FDI in India.
Kochhar & Co., Advocates and Legal Consultants, S-454, Greater Kailash Part – II, New Delhi- 110 048
Tel: +91 11 4111 5222, 2921 5477 Fax: +91 11 2921 9656 Email: delhi@kochhar.com
Offices also in ATLANTA, BANGALORE, CHENNAI & MUMBAI