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Sez - Special Economic Zones

Sez - Special Economic Zones

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Special Economic Zone

Any person, whether an individual, company, firm, cooperative society can file application for setting up of special economic zone (SEZ). SEZ can be established either jointly or separately by central government, any State Government, or any other person for the purpose of manufacturing of goods or rendering of services or both. Asian countries like India was the first to recognize the efficiency of the export processing zone (EPZ) model which is used to promote exports.

An area in a state which we can consider as duty free zone in basically called SEZ. This area is free from high excise duties and charges by the government and they provide tax exemption on duties (IT, excise, customs, sales) and subsidies on use of water and electricity. It is an entity outside the custom boundaries of India in relation to authorized operations. Section 3 of the Special Economic Zone Act, 2005 specifies the following procedure for setting up of SEZ.

Documents required for setting up a SEZ in India

Following documents along with an undertaking and affidavit are required to be submitted in Form A for setting up of SEZ:

  • Name of the applicant
  • Proposed area of SEZ
  • Status of recommendation of proposal by the state government, if available
  • Whether proposal is for formal approval or in-principle approval
  • Whether it is multi-product SEZ
  • Whether it is sector-specific SEZ? If yes, the details of sector thereon
  • Projected investment in project
  • Projected export from the project
  • Projected employment generation from the project
  • Source of fund of project
  • Net worth of the applicant
  • Extent of foreign direct investment (FDI), if any
  • Source of FDI

Procedure for obtaining a SEZ approval

  • 1. An application in Form A is to be made by the applicant to state government. The proposal can only be made, after discerning the area for establishing of SEZ. Proposal for setting up of SEZ can even directly be made before the board of directors (“Board”).
  • 2. In case, the proposal is made directly to the Board, the applicant is required to obtain the approval of the state government, simultaneously.
  • 3. After receiving the proposal, it is the duty of state government to forward the same to the Board, along with its recommendations.
  • 4. Central government has the authority of prescribing various requirements for setting up of SEZ. Minimum area of land requisite for setting up of business, terms and conditions for diversified authorized operations are some of the illustrations of various requirements which can be specified by central government.
  • 5. On receipt of proposal, it is on the discretion of the Board, subject to such terms and conditions as it may deem fit, to approve, modify or even reject the proposal.
  • i) If approval given without modification: The Board is obligated to communicate the approval to the central government.
  • ii) In case of approval with modification: The Board is required to commune the modification to the applicant or the state government of the concerned applicant. Further, if the modification as proposed by the Board is accepted by the person or the state government, the Board is required to communicate the same to the central government.
  • iii) If proposal is rejected: The Board is required to record the reason for rejection and communicate the same to central government. Central government in turn would intimate the same to the person or the state government.
  • 6. Central government on receipt of communication would issue a letter of approval on such terms, conditions, obligations and entitlements as may be approved by the Board to the developer being the person or the state government concerned.