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Proposal:
Moving from STPI to SEZ

www.bcshettyco.com

1
Contents
•

•
•

•
•

Moving to SEZ – Snapshot of SEZ Benefits
Evaluation
Comparison
• Benefits
• Obligations
Exhibit 1
Co...
SNAPSHOT OF SEZ BENEFITS - UNIT

www.bcshettyco.com

3
Procedures for Setting up a Unit in SEZ
Approach SEZ
developer
Discussion /Briefing session
Details of
the form to
be
exam...
After obtaining willingness letter from SEZ developer/ Codeveloper for allocating space

Time - Working days

Online regis...
If proposal Approved

Letter of Approval (LOA) issued by Development
Commissioner** in Form G

15 days of meeting

Total ~...
Evaluation
For shifting or opening a new unit in SEZ,

things to be considered:



The Company has to make a thorough an...
Capital gains tax incidence on disposal of STP unit
Slump Sale

Normal Sale

In Case of transfer agreement
Whole of unit i...
Comparison between schemes: Benefits
Benefits

Normal scheme

STPI

SEZ

Eligible entity

Any

Having export and
local sal...
Comparison between schemes: Benefits
Benefits

Normal scheme

STPI

SEZ

FDI investment

Restriction applicable

100% FDI ...
Comparison between schemes: Obligations
Obligations

Normal scheme

STPI

SEZ

Achieve positive Net Foreign exchange
earni...
Major Indirect Benefits of Business Structuring for SEZ
 External commercial borrowing to USD 500 million in a year witho...
Amount in INR

Exhibit 1:
Particulars

Normal
scheme

Under STPI
Scheme

a) Sales

100 Lakhs

100 Lakhs

100 Lakhs

b) Pro...
Amount in INR

Exhibit 1: contd.
Particulars

2013-14

2014-15

a) Savings in Tax assuming
20% increase in sales every
yea...
Cost


We provide end to end compliance services for SEZ units. Cost of SEZ
registration is:
Particulars
Fees (In INR)
SE...
CONTACT US
# 137, B/w 4th and 5th Main, MES College Road, 15th cross, Malleshwaram,
Bangalore – 560003
 (080) 2344 3636 ...
CONTACT US
# 37, “Ashritha”, Sirur Park,Vidyanagar, Hubli – 21.


(0836) 4251897  94481 21897 bcshettycohubli@gmail.com
...
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Feasability of moving from stpi or indian company to sez

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B C Shetty & Co. is a chartered Accountancy Firm Specializing in SEZ compliances. This is a small analysis of the work we do.

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Feasability of moving from stpi or indian company to sez

  1. 1. Proposal: Moving from STPI to SEZ www.bcshettyco.com 1
  2. 2. Contents • • • • • Moving to SEZ – Snapshot of SEZ Benefits Evaluation Comparison • Benefits • Obligations Exhibit 1 Cost www.bcshettyco.com 2
  3. 3. SNAPSHOT OF SEZ BENEFITS - UNIT www.bcshettyco.com 3
  4. 4. Procedures for Setting up a Unit in SEZ Approach SEZ developer Discussion /Briefing session Details of the form to be examined by the developer Furnishing the application form to allot Space in SEZ Unit Obtaining the Willingness Letter from developer to allocate space www.bcshettyco.com 4
  5. 5. After obtaining willingness letter from SEZ developer/ Codeveloper for allocating space Time - Working days Online registration with SEZ Development Commissioner Submission of Proposal* to the Development Commissioner with Five Copies of Form F along with required documents 7- 15 days based on availability of information Development Commissioner to scrutinize the proposal and call for a meeting Proposal Approved or rejected by Approval Committee www.bcshettyco.com 15 – 45 days of receiving proposal 5
  6. 6. If proposal Approved Letter of Approval (LOA) issued by Development Commissioner** in Form G 15 days of meeting Total ~ 60 days Send acceptance letter along with Bond cum Legal Undertaking to development commissioner 7 days of obtaining LOA Lease Agreement between the developer & Entrepreneur (Form H) has to registered with sub registrar 6 months time allowed Furnish copy of Registered Lease to the DC ** Development commissioner sits in Kochi www.bcshettyco.com 6
  7. 7. Evaluation For shifting or opening a new unit in SEZ, things to be considered:  The Company has to make a thorough analysis of cost involved in setting up of new unit and forecasted revenues.  If new unit setup involved procurement of Capital Goods in high number then SEZ or STPI option is preferable since cost will be low as no duty payable thereon.  If the intention is to save income tax on high margin contracts, the only option preferred is SEZ.  If the company intends to reduce statutory procedures, then a regular unit (NonSEZ/Non –STPI) is preferable however no tax concessions shall be available. www.bcshettyco.com 7
  8. 8. Capital gains tax incidence on disposal of STP unit Slump Sale Normal Sale In Case of transfer agreement Whole of unit is sold/ transferred. Individual value not known In Case of transfer agreement Individual value of assets to be considered Valuation of Assets: In case of depreciable assetsWDV of the assets Others book value of the assets Valuation of Assets: Revalued amount of assets No Indexation benefit will be available Indexation benefit will be available only on land LTCG if unit was held for more than 36 months irrespective of individual assets LTCG or STCG is computed for individual assets Note : • For Sec 50 C computation is applicable to Land & Building • 54EC and 54F exemption is available on LTCG www.bcshettyco.com 8
  9. 9. Comparison between schemes: Benefits Benefits Normal scheme STPI SEZ Eligible entity Any Having export and local sales (allowed 50% of exports Mainly into exports Income Tax exemption No No Yes (15 years tax holiday, But MAT @ 18.5% applicable Service Tax input exemption No. If export business then can obtain refund. But will take 3 years. So cash is stuck Yes. However refund of tax will take 3 years, so cash is stuck Exempted. So cash is freely available Central sales tax exempted: inputs No No, reimbursement available Yes Customs duty exempted: inputs No Yes Yes www.bcshettyco.com 9
  10. 10. Comparison between schemes: Benefits Benefits Normal scheme STPI SEZ FDI investment Restriction applicable 100% FDI allowed 100% FDI allowed Single window clearance from all govt departments No Yes Yes Free External commercial borrowings No No Yes upto $500 mn www.bcshettyco.com 10
  11. 11. Comparison between schemes: Obligations Obligations Normal scheme STPI SEZ Achieve positive Net Foreign exchange earning Not applicable Yes Yes Separate books of accounts to be maintained Not required Yes Yes Periodical reports submission Not required Yes. To STPI Yes. To SEZ department Execute bonds as guarantee against duty benefits Not required Yes Yes www.bcshettyco.com 11
  12. 12. Major Indirect Benefits of Business Structuring for SEZ  External commercial borrowing to USD 500 million in a year without any maturity restriction through recognized banking channels  100% FDI/NRI investment allowed under automatic route  100% retention of export proceeds in Foreign Currency account www.bcshettyco.com 12
  13. 13. Amount in INR Exhibit 1: Particulars Normal scheme Under STPI Scheme a) Sales 100 Lakhs 100 Lakhs 100 Lakhs b) Profit @ 20 % of sales 20 Lakhs 20 Lakhs 20 Lakhs b) Income Tax rate 32.445% 32.445% 20% c) Income Tax Payable 6.5 Lakhs 6.5 Lakhs 4 Lakhs e) Input services (assuming 30% of sales) 30 Lakhs 30 Lakhs 30 Lakhs f) Input Service Tax @ 12.36% of e 3. 71 Lakhs 3. 71 Lakhs NIL as Service Tax is exempt 2.00 Lakhs NIL g) Interest on delayed refund of ST @ 18% of as there is 3 years delay in obtaining refund Total savings per annum Under SEZ scheme Savings from SEZ vis-a-vis normal scheme 2.5 Lakhs Savings from SEZ vis-avis STPI 2.5 Lakhs 3.71 Lakhs 2.00 Lakhs 6.21 Lakhs www.bcshettyco.com 4.50 Lakhs 13
  14. 14. Amount in INR Exhibit 1: contd. Particulars 2013-14 2014-15 a) Savings in Tax assuming 20% increase in sales every year 4.50 Lakhs 5.40 Lakhs b) Fixed Asset investment (11.50 Lakhs) 2017-18 7.77 Lakhs 9.33 Lakhs 11.19 Lakhs 7.77 Lakhs 9.33 Lakhs 11.19 Lakhs 4 Lakhs d)Net Cash flow from operations (a-b+c) 2016-17 20 Lakhs c) Shifting of old asset allowed upto 20% 2015-16 5.40 Lakhs e) Net cash flow at end of 5 years 28.68 lakhs f) Difference in Rent from STPI to SEZ www.bcshettyco.com 14
  15. 15. Cost  We provide end to end compliance services for SEZ units. Cost of SEZ registration is: Particulars Fees (In INR) SEZ Registration with Cochin SEZ and obtaining Letter of Approval 2,00,000 Terms & Conditions •Unless a shorter period is established in the invoice, Client will promptly pay not later than 30 days from the relevant invoice date failing which interest will become due at a rate of 1.5% per month from the Due Date up to date payment is actually received. •As fees quoted to the Client are based on the information provided by the Client and are applicable to the time of submitting the fee quotation, the Firm reserves the right to increase its charges if the Client’s instructions are found to be not in accordance with the initial details supplied or used for the purpose of obtaining a fee quotation. Clients will be notified of any increase in fees. •Additional fees shall be charged for (i) operations that are not included in the Contract and / or (ii) rush orders, cancellation or rescheduling of services or any partial or full repeats which will be payable at the Firm’s prevailing charging rates. •Unless otherwise stated all fees quoted are exclusive of travelling and subsistence costs (which will be charged to the Client at cost). All fees and additional charges are exclusive of any applicable Service Tax. www.bcshettyco.com 15
  16. 16. CONTACT US # 137, B/w 4th and 5th Main, MES College Road, 15th cross, Malleshwaram, Bangalore – 560003  (080) 2344 3636  99451 79868  bcshettyco@gmail.com Namratha Icon ,# 3 2nd Floor, Kundalahalli Extension, ITPL Main road, Opp. Sterling Brookside Apartments, Bangalore – 560 037.  99807 79868 / 98447 17161 Stylus Serviced Offices, Ground Floor, E 1 Block, Beech Building, Manyata Embassy Business Park, Outer Ring Road, Bangalore 560045 , 080-42764562 www.bcshettyco.com 16
  17. 17. CONTACT US # 37, “Ashritha”, Sirur Park,Vidyanagar, Hubli – 21.  (0836) 4251897  94481 21897 bcshettycohubli@gmail.com Mahesh Prasad Complex, C.H.19, M.G. Road, Chamaraj Mohalla, Mysore – 570064.   +91 9964684376, Email: dinesh@bcshettyco.com www.bcshettyco.com 17

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