Rule 19 - Letter of Approval to a Unit - Special Economic Zones Rules, 2006

19. Letter of Approval to a Unit.- (1) On approval of a proposal under rule 18 and 19, Development Commissioner shall issue a Letter of Approval in Form G, for setting up of the Unit: (2) The Letter of Approval shall specify the items of manufacture 6 [ along with the corresponding Indian Trade Classification (Harmonised System) of Export and Import Items, 2017 ] or particulars of service activity, including trading or warehousing, projected annual export and Net Foreign Exchange Earning for the first five years of operations, limitations, if any on Domestic Tariff Area sale of finished goods, by-products and rejects and other terms and conditions, if any, stipulated by the Board or Approval Committee: 3 [Provided that the Approval Committee may also approve proposals for broad-banding, diversification, enhancement of capacity of production, change in the items of manufacture or service activity, if it meets the requirements of rule 18: Provided further that no such approval shall be granted by the Approval Committee in those cases which fall within the competence of the Board of Approval: 4 [Provided also that, subject to the provisions of rule 74A] the Approval Committee may also approve change of the entrepreneur of an approved unit, if the incoming entrepreneur undertakes to take over the assets and liabilities of the existing Unit] 7 [ Provided also that the Approval Committee may also approve proposals for merger of Letters of Approval of two or more Units of the same company or firm subject to the condition that these Units fall within the same Special Economic Zone and after merger, block period for calculation of Net Foreign Exchange shall be from the date of commencement of production of the Unit which commenced operation first and the Income tax exemption period shall be considered from the date of start of operation of the first Unit. ] (3) An entrepreneur holding Letter of Approval issued under sub-rule (1) 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: Provided that a proposal for setting up of a Unit in a Special Economic Zone or Free Trade Warehousing Zone shall be entertained only after the processing area of the Special Economic Zone or Free Trade Warehousing Zone has been demarcated under rule 11. (4) The Letter of Approval shall be valid for one year within which period the Unit shall commence production or service or trading or Free Trade and Warehousing activity and the Unit shall intimate date of commencement of production or activity to Development Commissioner: Provided that upon a request by the entrepreneur, further extension may be granted by the Development Commissioner for valid reasons to be recorded in writing for a further period not exceeding two years: Provided further that the Development Commissioner may grant further extension of one year subject to the condition that two-thirds of activities including construction, relating to the setting up of the Unit is complete and a chartered engineer's certificate to this effect is submitted by the entrepreneur. 5 [Provided also that the Board of approval may, upon a request in writing by the entrepreneur, and after being satisfied that it is necessary and expedient so to do grant further extension for a further period not exceeding one year, at a time.] (5) If the Unit has not commenced production or service activity within the validity period or the extended validity period under sub-rule (4), the Letter of Approval shall be deemed to have been lapsed with effect from the date on which its validity expired. (6) The Letter of Approval shall be valid for five years from the date of commencement of production or service activity and it shall be construed as a licence for all purposes related to authorized operations, and, after the completion of five years from the date of commencement of production, the Development Commissioner may, at the request of the Unit, extend validity of the Letter of Approval for a further period of five years, at a time. 8 [ (6A)(1) The Units which intend to renew the validity of Letter of Approval shall submit, before two months from the date of expiry of the Letter of Approval, the completed application in form F1 along with requisite document, to the Development Commissioner, duly signed by the proprietor or managing partner or if it is a company, by the Managing Director or the Director(s) or any person who has or have been duly authorised for this purpose by a resolution of the 9 [ Board ] of Directors of the Company: 10 [ Provided that in case an application is submitted after the said period of two months, reasonableness of the delay shall be examined on the merits and circumstances of the case and the request for renewal of Letter of Approval shall be decided by the Development Commissioner. ] (2) in case of non-compliance of the procedures specified in clause (1), the Letter of Approval shall not be considered for renewal. (3) the Development Commissioner may renew the Letter of Approval for a period of five years or for a shorter period, in form F 2, based on the evaluation of the Unit as per sub-rule (6B): 11 [ (6B) The process of renewal of Letter of Approval shall take into account the efforts made and the results achieved or status of the following criteria, namely:- (i) Export performance of the Unit in the last block. (ii) Employment generated. (iii) Instance of violation of applicable statutes related to the functioning of the Unit. (iv) Cases of default, if any, of statutory payments. (v) Undertaking of any activity not sanctioned or approved by the Development Commissioner. (vi) The decision of the Development Commissioner or Approval Committee in this regard shall be final and binding on the Unit except in cases where the Unit prefers an appeal before the Board of Approval, in accordance with rule 55. ]] (7) If an enterprise is operating both as a Domestic Tariff Area unit as well as a Special Economic Zone Unit, it shall have two distinct identities with separate books of accounts, but it shall not be necessary for the Special Economic Zone unit to be a separate legal entity: 2 [Provided that 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 (Establishment in India of branch or office or other place of business) Regulations, 2000 as amended from time to time.] ************** Notes: 1. First provision of sub-rule (2) has been substituted vide notification no. G.S.R.72 (E).- dated 3-2-2009 , earlier it was read as: Provided that the Approval Committee may also approve proposal for broadbanding, diversification, enhancement of capacity of production, change in the items of manufacture or service activity, if it meets the requirements of rule 18. 2. Proviso to sub-rule (7) has been substituted vide notification no. G.S.R.72 (E).- dated 3-2-2009 , earlier it was read as: Provided that 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.] 3. Substituted vide notification no. S.O. 1293 (E) dated 20-5-2009 , earlier it was read as: 1 [Provided that no such approval shall be granted by the Approval Committee in those cases which fall within the competence of the Board of Approval;] Provided further that the Approval Committee may also approve change of the entrepreneur of an approved unit, if the incoming entrepreneur undertakes to take over the assets and liabilities of the existing Unit 4. Substituted vide Notification No. C.2/1/2013-SEZ-SEZ dated 12/08/2013 before it was read as provided also that . 5 . Inserted vide G.S.R. 903(E) - Dated 10-11-2010 6 . Inserted vide Notification No. G.S.R. 909(E) dated 19-09-2018 7 . Inserted vide Notification No. G.S.R. 909(E) dated 19-09-2018 8 . Inserted vide Notification No. G.S.R. 909(E) dated 19-09-2018 9. Substituted vide NOTIFICATION No. G.S.R. 200(E) dated 07-03-2019 before it was read as Board of Approval 10. Substituted vide NOTIFICATION No. G.S.R. 200(E) dated 07-03-2019 before it was read as Provided that in case an application is not submitted before the said period of two months, such application shall be placed before the Approval Committee and the said Committee, if it is satisfied that there was sufficient cause for not filling the same before the said period, may direct for entertainment of such application. 11. Substituted vide NOTIFICATION No. G.S.R. 200(E) dated 07-03-2019 before it was read as (6B) The renewal of Letter of Approval shall be based on the evaluation of the following criteria, namely:- (i) Export performance of the Unit in the last block vis-a-vis the initial export projection submitted by the Unit. (ii) Projected employment with reference to actual employment generated. (iii) Instance of violation of applicable statutes related to the functioning of the Unit. (iv) Cases of default, if any, of statutory payments. (v) Undertaking of any activity not sanctioned or approved by the Development Commissioner. (vi) The decision of the Development Commissioner or Approval Committee in this regard shall be final and binding on the Unit except in cases where the Unit prefers an appeal before the Board of Approval, in accordance with rule 55 .