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Special Economic Zones

Customs - CBEC s Customs Manual 2015 - 24 - Chapter 24 1. Introduction: 1.1 Special Economic Zone (SEZ) scheme was announced in April, 2000 with a view to provide an internationally competitive environment for exports. The objectives of include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoti .....

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as found to be necessary. Accordingly, the SEZ Act, 2005 was enacted, which was given effect to from 10-2-2006. Thus, activities of SEZs and its units are governed by the provisions of the SEZ Act, 2005 and the rules issued there under viz. SEZ Rules, 2006. SEZ Scheme is administered by the Department of Commerce under Ministry of Commerce & Industry. 1.3 The Central Government, while notifying any area as a Special Economic Zone or an additional area to be included in the Special Economic Z .....

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Zone. In terms of Section 53 of the SEZ Act, SEZs are deemed to be a territory outside the Customs territory of India for the purpose of undertaking the authorised operations and goods/ services entering it (from DTA) are treated as exports. 1.5 19 SEZs were established / notified before the enactment of the SEZ Act, 2005. Of which, seven SEZs were established by Central Government and rest by State Governments and private sector, which are as follows: (a) Central Government SEZs: Kandla SEZ (G .....

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Nokia SEZ (Chennai). 2. Board of Approvals: 2.1 As per Section 8 of the SEZ Act, the Board of Approval (BOA) is to be chaired by an officer not below the rank of Additional Secretary in the Department of Commerce and includes Member (Customs), CBEC as its member. Presently, the BOA meetings are chaired by Commerce Secretary. The BOA approves proposals for establishing SEZs and providing infrastructure facilities. Its functions include approving authorized operations of Developer/Co-developer. 3 .....

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ired to monitor and supervise compliance of conditions subject to which the letter of Approval (LOA) has been issued. Commissioner of Customs or his nominee not below the rank of a joint Commissioner is designated as an ex-officio member of the UAC. However, meetings of the Approval Committee must be attended by the Jurisdictional Commissioner of Customs or Central Excise and never go unrepresented as decisions taken in such meeting have serious revenue implications. It should also be ensured th .....

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d 4-7-2007] 4. Establishment of SEZs: 4.1 The SEZs can be set up either jointly or severally by the Central Government, State Government, or any person as per Section 3 of the SEZ Act. Such person or body or authority is termed as developer/co-developer of the SEZ in terms of Section 2(g) of the SEZ Act. A Co-developer is a person who is allowed to provide any infrastructure facility in the SEZ in accordance with an agreement with the developer and as approved by the Board of Approval. The State .....

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of a Special Economic Zone, in accordance with the provisions of Section 3(8) of the SEZ Act subject to the requirements of minimum area of land and other terms and conditions indicated in Rule 5(2) of the SEZ Rules. 5. Setting up of SEZ unit: 5.1 As per Section 15 of the SEZ Act, any person, who intends to set up a Unit for manufacture of goods or rendering services in a Special Economic Zone, may submit a proposal to the Development Commissioner concerned. On receipt of the proposal, the Devel .....

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it shall intimate date of commencement of production or activity to Development Commissioner. On receipt of a request from the entrepreneur, further extension can be granted by the Development Commissioner for a further period not exceeding two years. 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. If the Unit has not commenced production or serv .....

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missioner may, at the request of the Unit, extend validity of the Letter of Approval for a further period of five years. 6. Monitoring of activities of SEZ units: 6.1 As per Rules 15 and 54 of the SEZ Rules, the performance of the Unit is to be monitored by the Approval Committee. If Approval Committee comes to the conclusion that a Unit has not achieved positive Net Foreign Exchange Earning or failed to abide by any of the terms and conditions of the Letter of Approval or Bond-cum-Legal Underta .....

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Rules. 8. Import and procurement: 8.1 A SEZ unit or Developer/co-developer may import or procure from the Domestic Tariff Area without payment of duty, taxes or cess or procure from Domestic Tariff Area after availing export entitlements or procure from other Units in the same or other Special Economic Zone or from Export Oriented Unit or Software Technology Park unit or Electronic Hardware Technology Park unit or Bio-technology Park unit, various types of goods, including capital goods (new or .....

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itlements are not availed); (ii) on the basis of ARE 1 and Bill of Export (in cases where export entitlements are availed). In the event of non-receipt of the proof of export in the form of endorsement, regarding admittance of goods in full into the Special Economic Zone, by the Authorized Officer of Customs posted in the SEZ, on ARE-1 and / or Bill of Export, as the case may be, within a period of 45 days, the duty should be demanded from DTA supplier by the jurisdictional Central Excise Office .....

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b-contracting: 10.1 As per rule 41 of the SEZ Rules, a unit may sub-contract a part of its production or any production process, to a unit in the Domestic Tariff Area or in a Special Economic Zone or Export Oriented Unit or a unit in Electronic Hardware Technology Park unit or Software Technology Park unit or Bio-technology Park unit with prior permission of the Specified Officer to be given on an annual basis. No permission is necessary if sub- contracting is done through units in same SEZ but .....

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logy Park Unit, for sub-contracting a process, with prior permission of and subject to such conditions as may be prescribed by the Approval Committee. 11. Sub-contracting for DTA unit for export: 11.1 A Unit may on the basis of annual permission from the Specified Officer undertake sub-contracting for export on behalf of a Domestic Tariff Area exporter subject to conditions prescribed in Rule 43 of the SEZ Rules. 11.2. As per Rule 47(2) of the SEZ Rules, scrap or dust or sweepings of gold or sil .....

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in the Domestic Tariff Area on payment of applicable Customs Duties in terms of Section 30 of the SEZ Act and subject to fulfillment of condition laid down in the SEZ Rules. 13. Valuation of goods cleared into DTA: 13.1 As per Rule 48 of the SEZ Rules, valuation of the goods and/or services cleared into Domestic Tariff Area shall be determined in accordance with provisions of Customs Act and rules made thereunder as applicable to goods when imported into India. If goods procured from Domestic Ta .....

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display, export promotion, exhibition job work, test, repair, refining, calibration or subject to conditions as prescribed. If a unit fails to bring back the goods into SEZ within the prescribed period, the unit is liable to pay applicable duty on such goods. 15. Duty remission on destruction of goods: 15.1 As per Rule 39 of the SEZ Rules, after advance intimation to the Specified Officer, a Unit may destroy, without payment of duty, goods including capital goods, procured from Domestic Tariff A .....

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stones is not allowed. The officers supervising destruction are required to ensure that goods are destroyed fully rendering them unfit for further use and give certificate to that effect. The Unit shall be required to pay back the drawback and Duty Exemption Pass Book credit availed in of case goods procured from Domestic Tariff Area are destroyed due to natural calamities. 16. Exit of units: 16.1 As per Rule 74 of the SEZ rules, the Unit may opt out of Special Economic Zone with the approval o .....

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alloys, gem and other materials available for manufacture of jewellery is required to be handed over to an agency nominated by the Central Government at a price to be determined by that agency. 16.3 Development Commissioner can permit a Unit, as one time option to exit from Special Economic Zone on payment of duty on capital goods under the prevailing Export Promotion Capital Goods Scheme under the Foreign Trade Policy subject to the Unit satisfying the eligibility criteria under that Scheme. 1 .....

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Station of export could sanction such Drawback claims. Thus, Drawback claim in respect of such supplies are not to be processed or sanctioned by the Customs and Central Excise formations. 17.2 Drawback can also be claimed by the DTA supplier on the basis of the disclaimer issued by the SEZ Unit/Developer. In such cases, the Commissionerate of Customs and Central Excise having jurisdiction over the DTA unit would sanction the Drawback. The jurisdictional Commissioner of Customs in consultation w .....

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and the same cheque book can be used for making refunds and payment of Drawback. The cheque issuing officer is required to submit separate list of payment for Central Excise (0038) and Customs (0037) to their jurisdictional PAO. 18 Other administrative guidelines: [Refer Circular No.39/2010-Cus, dated 15-10-2010] 18.1 The Customs/Central Excise Officers nominated to the Approval Committee of SEZs should ensure that the decisions taken at the Committee are within the provisions of law and should .....

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