CA Bharat Mathur
Article discusses amendment in Special Economic Zones Rules, 2006 vide Special Economic Zones (Amendment) Rules, 2018 which were notified vide notification No. G.S.R. 909(E). dated 19th September, 2018.
|Sr. No.||SEZ Rule Reference||Extract Of the Original
|Corresponding Amendments under SEZ (Amendment) Rules, 2018|
|1||2(k), 2(1) – Definitions||Definition of Duty Entitlement Pass Book Scheme (DEPB) and Duty Free Replenishment Certificate (DFRC)||Omitted|
|2||3 – Proposal for
setting up of Special
|The proposal should be made to the concerned Development
Commissioner, who shall forward it to the Board along with his inspection report and State
|Besides the recommendation from State Government, the recommendation for National Security clearance as per the guidelines issued by the Ministry of Home Affairs shall also be required.|
|3||5(2)(b) — Minimum
establishment of a SEZ
|There shall be no minimum area requirement for setting up a SEZ for IT or IT enabled services, but a minimum built up processing area requirement shall be applicable.||The benefit of no minimum area requirements have been extended to Bio — technology and Health Sector (excluding hospitals).|
|4||Proviso to 11(2) —
Processing and non — processing area
|The processing area and Free Trade & Warehousing Zone for an IT or IT enabled or electronic hardware or biotechnology specific SEZ shall
have specified entry and exit points and should be fully secured by
taking such measures as approved by the BOA. The DC shall approve such measures and inform the Board accordingly.
|Instead of informing the Board, the Development Commissioner shall approve such security measures and inform the Approval Committee.|
|5||12(6) — Import and procurement of goods by the developer||The Developer shall maintain a proper account of the import or procurement, consumption and
utilization of goods.
|In addition to the maintenance of records in respect of the procurement & utilization of goods, the developer shall maintain a proper account of the utilization of services.|
|12(7)||The developer shall submit a half —
yearly certificate regarding the
|The developer shall now be required to submit a half — yearly certificate regarding the utilization of goods and services certified from an independent Chartered Engineer / CA / CMA.|
|6||17(1) — Proposal for
approval of unit
|An application for setting up a Unit and other clearances, shall be made to the DC, in Five copies, with a copy to the Developer.||The words “in five copies” shall be omitted.
Further, instead of the Sales Tax registration, a copy of the GST registration certificate should be provided along with the application.
|7||18(3) — Consideration
of the proposal
|The proposal for setting up a Unit should fulfil the sector — specific requirements as prescribed.||The sector specific requirement criteria has been done away with.
Further, it is prescribed that the export of goods from SEZ shall be subject to the export policy in force.
For Gems and Jewellery, the minimum value addition earning requirement shall be as specified in the prevailing Foreign Trade Policy.
|8||Insertion of Rule 18(4A)||–||For existing plastic or used clothing units:
a) Broad — banding and splitting of licenses not allowed
b) No third party exports
c) Units shall set up facilities to make products out of used clothing or plastic waste
d) 100% inspection of the consignment of used clothing sale to DTA
|Insertion of Rule 18(413)||–||Each consignment of used clothing imported by a unit shall be accompanied with a certificate from exporter regarding the dis-infection and fumigation of
|9||19(2) — Letter of Approval to a unit||The LOA shall specify the items of manufacture or particulars of
|The LOA shall specify the items of manufacture along with the corresponding HSN codes.|
|Insertion of 4th
proviso to Rule 19(4)
|–||The Approval Committee may also approve proposals of mergers of LOAs of two or more units of the same company if they all fall within the same SEZ and the block period for calculation of NFE and the income tax exemption shall be from the date of commencement of commercial production of the Unit which commenced operations first.|
|Insertion of Rule 19(6A)||–||The application for renewal of the validity of LOA shall be submitted before 2 months from the date of expiry of the LOA.
The DC may renew the LOA for a period of 5 years or for a shorter period on the basis of evaluation of the unit.
|10||22(1) — Terms and conditions for grant of
permission to operate
|The Developer and Co-developer shall execute the Bond-cum Legal Undertaking in Form D with regard to their obligations regarding
proper utilization and accountal of goods, including goods procured or imported by a contractor duly authorized by the Developer or Codeveloper.Value of bond —cum- Legal undertaking executed by a unit shall be equal to the amount of duties leviable on imported and domestic procurement of goods.
|The amendment seeks to bring into purview the goods procured by a sub —contractor as well.
However, it should be noted that such provisions are applicable only for the developer and co-developer.
The amendment seeks to provide that the value of bond — cum- legal undertaking shall take into account the amount of duties leviable on goods as well as services.
|11||Insertion of 5th
proviso to Rule 26
|–||Provided also that Special Economic Zone Units shall be permitted to export prohibited items, if they import raw-material for the same, but each such case shall be placed before Board of Approval for approval.
Provided also that items which are prohibited for import, Special Economic Zone Units shall be permitted to import the same if they export goods made out of the same but each such case shall be placed before Board of Approval of Approval for approval.
|12||27 — Duty free imports and domestic
procurements by a unit
|The tax exemptions on goods and services required for setting up and maintenance of factory building shall also be available to the contractors appointed by that unit.||The ambit of tax exemptions has now been extended to contractors as well as sub-contractors.|
|13||30 — Procedure for domestic
|Clearance of goods under bond or under claim of rebate on the cover of ARE 1.||Clearance of goods under bond / LUT or such procedure as may be prescribed under the GST Act.|
|A copy of the ARE-1 and/or copy of Bill of Export, as the case may be, with an endorsement by the authorized officer that goods have been admitted in full into the Special Economic Zone shall be forwarded to the Central Excise
Officer having jurisdiction over the Domestic Tariff Area supplier within forty-five days failing which the Central Excise Officer shall raise demand of duty against the Domestic Tariff Area supplier.
|A copy of the document referred to in sub-rule (1) or copy of Bill of Export, as the case may be, with an endorsement by the authorised officer that goods have been admitted in full into the Special Economic Zone shall be treated as proof of export and a copy with such endorsement shall also be forwarded by the Unit or Developer to the Goods and Services Tax or Central Excise Officer having
jurisdiction over the Domestic Tariff Area supplier within forty-five days failing which the Goods and Services Tax or Central Excise Officer, as the case may be, shall raise demand of tax or duty against the Domestic Tariff Area supplier.
|14||46(1)(C) — Procedure
for export of goods
|The goods shall not be subjected to routine examination and ‘Let Export Order’ shall be given on the basis of self-certification by the Unit.||However, in case Merchandise Exports from India Scheme benefit is claimed then examination of export cargo shall be done as per examination norms set by Central Board of Indirect Taxes and
|15||53 — Net Foreign
|KEY AMENDMENTS: –
L For the purpose of INFLOW, other than the FOB on approval value of exports, the supplies must be manufactured in the SEZ.
It implies that for cases other than physical exports, besides meeting the prescribed NFE conditions, the goods must be manufactured in the SEZ and should not be in the nature of traded goods.
+k For the purpose of OUTFLOW, Cost Insurance and Freight value of all imported or indigenous inputs used for authorised operations during the relevant period and the Cost Insurance and Freight value of all imported capital goods including goods purchased on high seas basis even though paid for in Indian Rupees and the value of all payments made in foreign exchange by way of export commission, royalty, fees, dividends, interest on external commercial borrowings during the first five year period or any other charges.
Prior to this amendment, the value of imported inputs ONLY was taken into NFE consideration. However, the amendment now proposes to take into account both imported and domestic procurement of inputs as an outflow for NFE computations.
|16||Insertion of new Rule 80||–||If a Special Economic Zone Unit, in case of bona fide default, fails to achieve the minimum specified Net Foreign Exchange or specified value addition, then such shortfall may be regularised after the Unit deposits an amount equal to one per cent of shortfall in Free on Board of Approval Value.|
The author is a practicing Chartered Accountant and can be reached at [email protected]