fdi in india and its growth linkages - Department Of Industrial Policy ...

4.4 Management of SEZs
SEZs are under the administrative control of the Development Commissioner (DC). There is a single-window clearance
for SEZs, and all approvals and clearances for the establishment and operation of units in the SEZ are granted by the
Unit Approval Committee which comprises the DC and nominees of the central and state governments. All activities
of the SEZ unit, unless otherwise specified, are through self-certification procedures and are monitored by a Committee
comprising the Development Commissioner and Customs. If the Board of Approval is of the opinion that any Special
Economic Zone is fully developed or the status of duty-free enclave is no longer viable or beneficial to the Zone, it may
recommend the closure of the Zone to the Central Government.
The Development Commissioners (DCs) of SEZs accord automatic approval to projects where:
i. The proposed activity does not attract compulsory licensing or falls in the services sector, except software & ITenabled
services;
ii. The location conforms to the prescribed parameters;
iii. Units undertake to achieve positive net foreign exchange earnings; and
iv. The unit is amenable to bonding by customs authorities.
Conversion of existing DTA units into Export-Oriented Units (EOU) is also permitted under the automatic route, if
the DTA unit satisfies the parameters above and there is no outstanding export obligation under any other exportoriented
scheme of the Government of India. All proposals for FDI/NRI investments in 100 per cent EOUs and units
in SEZ qualify for approval through the automatic route subject to sectoral norms. 3
The Central Government has offered various incentives and facilities both to developers of SEZs as well as industrial
units coming up in SEZs. All kinds of units, namely, manufacturing, trading and service activities are permitted in SEZs.
Facilities to Individual Industrial Units
� A designated duty-free enclave to be treated as foreign territory for trade operations and duties and tariffs. No
license required for import.
� Exemption from customs duty on import of capital goods, raw materials, consumables, spares, etc.
� Exemption from Central Excise duty on procurement of capital goods, raw materials, consumable, spares, etc. from
the domestic market.
� Reimbursement of Central Sales Tax paid on domestic purchases.
� 100 per cent income tax exemption for a block of five years, 50 per cent tax exemption for two years, and up to 50
per cent of the profits ploughed back for the next three years under Section 10-A of the Income Tax Act.
� Supplies from DTA to SEZ to be treated as exports under 80HHC of the Income Tax Act. 100 per cent income tax
exemption for three years and 50 per cent for two years under Section 80-LA of the Income Tax Act for offshore
banking units.
� External commercial borrowing by SEZ up to US$500 million a year without any maturity restriction through
recognised banking channels.
� Reimbursement of duty paid on furnace oil, procured from domestic oil companies to SEZ units, as per the rate of
drawback notified by the Directorate General of Foreign Trade.
� SEZ units may be used for manufacturing, trading or service activity.
� SEZ unit to be positive net foreign exchange earner within three years.
� Performance of the units to be monitored by a Committee headed by Development Commissioner and consisting of Customs.
3. Manual on FDI in India - Policy and Procedures, March 2004.
SPECIAL ECONOMIC ZONES (SEZS) AND FDI IN INDIA
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