A special economic zone (SEZ) is a geographical region that has economic laws that are more liberal than a country’s domestic economic laws. The Special Economic Zone (SEZ) policy in India first came into inception on April 1, 2000 to overcome the shortcomings experienced on account of multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime for foreign trade and with a view to attract larger foreign investments in India. This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. India has specific laws for its SEZs, i.e, the SEZ Act, 2005, supported by SEZ Rules, which came into effect on 10th February, 2006. SEZs were earlier functioning under the provisions of the Foreign Trade Policy. The prime objective of the act is to enhance foreign investment and provide an internationally competitive and hassle-free environment for exports.
Special Economic Zone
Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Any individual, co-operative society, company or partnership firm can file an application for setting up of Special Economic Zone which would be would be considered by the Board of Approval (BOA) only when the State Government recommendation is received. Also, a unit in SEZ can be established to avail various benefits provided by Ministry of Commerce and Industry.
The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-
Before filing application for establishment of unit in SEZ, an applicant must contact a SEZ Developer and should understand various projections and documentations required in the establishment process. Following steps are to be followed for filing application for setting up of SEZ unit:
1. An applicant shall first register himself as a user of SEZ Online so that he has a User ID and password to access the system. For registration, the user shall have to enter few basic details and submit the New Unit registration form online by visiting the SEZ Online website https://www.sezonline-ndml.com/index.htm.
2. An applicant needs to apply to Development commissioner’s (DC) office under whose jurisdiction Special Economic Zones operates and needs to file application form “F” stipulated by SEZ rules. Form “F” needs to be submitted online after logging into the SEZ Online system. The applicant needs to capture following fields while filing the application:
(i) Details of promoter/Industrial undertaking such as applicant’s name, IEC, PAN etc.
(ii) Registered Address of the applicant
(iii) Bank Details such as bank account number
(iv) Activities to be carried out in SEZ, auch as manufacturing of goods, provision of services, Industry Type etc.
(v) Demand Draft Details, A demand draft of Rs. 5000 is to be drawn in the favour of “Pay and Accounts Officer’ of the concerned Special Economic Zone and the details of the same are to be filled in the field.
(vi) Directors/Partners/Proprietor’s detail such as name, address and contact details
(vii) Investment details required for the business of the proposed SEZ Unit
(viii) Infrastructure details such as area required for factory, office, warehouse, effluent treatment and employment details.
(ix) Capital requirements such as Equity, debt or foreign capital requirements
(x) Projected net foreign exchange earnings for the next 5 years
(xi) Other details such as market collaboration or some feature of the project which the applicant wants to highlight.
3. After submiiting the Form F online, the applicant needs to submit the 5 hard copies of the application and annexures thereto to the DC’s office. Some of the annexures include:
(i) Detailed project report giving details of the project to be undertaken, financial and manpower requirements alongwith marketing letter
(ii) Undertaking for Pollution control
(iii) Affidavit that the contents of the application are true
(iv) Banker Certificate for opening a separate bank account
(v) Attachments relevant to the information filled in the application such as Certificate of incorporation, etc.
4. On receipt of the electronic application through SEZ Online and the supporting documents in physical form from the applicant, DC officials shall log on to SEZ Online system and view the proposal online. SEZ official will verify the supporting documents which have been submitted as physical copies.
5. Based on Approval Committee’s decision, DC’s Office will update the status (approved, rejected or approved proposal with modifications or approved proposal subject to conditions) in SEZ Online system.
6. In case the proposal is approved with modifications/any additional documents or changes or clarifications sought, DC official will submit such remarks in SEZ Online system.
7. While processing the application, if the DC Official finds a discrepancy, he might send the application back to the applicant, electronically, for necessary modifications /clarification. While sending back the application as discrepancy, the DC official shall provide his remarks about the discrepancy.
8. The applicant, (after receiving the application marked with discrepancy back), will have a facility to view and reply to the remarks. If modifications are required in Form F, then applicant can edit it and resubmit.
9. The applicant might have to explain in person that why they shall be issued a Letter of approval.
10. After assessing viability of the project in terms of Foreign exchange earnings, compliance of applicable laws, the SEZ official can approve of the proposal. The SEZ Official can view and print letter of approval through SEZ Online system and despatch the same to applicant.
Note: SEZ Online is a total integrated solution offered by NDML for the administration of SEZ to facilitate speedy processing of various transactions that SEZ developers/units have with SEZ administration.
(The author of this article is a Practicing Company Secretary and can be reached at [email protected])
Disclaimer: The contents of this article are solely for informational purpose. It does not constitute professional advice or a formal recommendation. No part of this article should be distributed or copied without express written permission of the author.