Overview on-procedure-for-setting-up-of-sez-unit

An overview on Procedure for Setting up of Unit in
Special Economic Zone(SEZ)
Vanam Sauchit
2nd Year Intern
M/s. SBS and Company LLP
sauchitv@sbsandco.com
040-40183366(115)
By
SBS Hyderabad
22nd November, 2018

sauchitv@sbsandco.com www.sbsandco.com 040-40183366(115)
• Introduction
• Evolution of SEZ
• Administrative setup for SEZ
• What is SEZ Unit?
• Comparison between SEZ and SEZ Unit
• Who can set up SEZ Unit?
• Procedure for setting up a Unit
• Validity/Extension/Cancellation of LOA
• Conclusion.
• Abbreviations
Synopsis

What is SEZ?
 As per SEZ Act,2005 -
“Special Economic Zone” means each Special Economic Zone notified under the proviso to sub-
section(4) of section 3 and sub-section(1) of section 4 and includes an existing Special
Economic Zone (SEZ).
[Refer Section 2, Sub section (za) of SEZ Act, 2005]
 In general -
“It is a specifically delineated duty-free enclave and shall deemed to be a foreign territory for
the purpose of trade operations, duties and tariffs”.
…EXIM Policy 2000, Chapter 9 para 30
Introduction

Export Processing Zone
(EPZ) in early 1970’s
Special Economic Zone
Policy, 2000
Special Economic Zone
Act, 2005
SEZ Rules, 2006
Evolution of SEZ

Administrative set up for SEZ
AdministrativeSetup
Board of Approval (BOA)
Unit Approval Committee (UAC)/
Development Commissioner (DC)
Specified Officer (SO)
Authorised Officer (AO)
Preventive Officer (PO)
Note : BOA Constituted by Central Government for SEZ is also the apex body for EOU to exercise powers conferred under EOU Scheme.

 As per SEZ Act, 2005 -
“Unit” means a Unit set up by an entrepreneur in a Special Economic Zone and includes an
existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre
whether established before or established after the commencement of this Act
[Refer Section 2, Sub section (zc) of SEZ Act, 2005]
 In general -
It is a specifically delineated area in the processing zone of SEZ setup by the entrepreneur (i.e.,
a person who has been granted a LOA by DC for setting up of SEZ Unit)
What is SEZ Unit?

 In general, the terms SEZ and SEZ Unit are considered to be similar, but these are actually
two different terms which altogether has two different parameters to be dealt with.
 SEZ is a specifically delineated duty-free area/zone setup in the Domestic Tariff Area (DTA)
(which would later be converted to SEZ area) and shall be deemed to be foreign territory for
the purposes of trade operations and duties and tariffs whereas Unit is specifically
delineated duty-free area/zone setup in the processing zone of SEZ.
Comparison between SEZ and SEZ Unit

 Any Person* can setup SEZ Unit.
*Person includes
• An Individual, whether resident India or outside India;
• A Hindu undivided family (HUF);
• Co-operative society;
• A company, whether incorporated in India or outside India;
• A firm;
• Proprietary concern;
• An association of persons or body of individuals, whether incorporated or not;
• Local authority and
• Any agency, office or branch owned or controlled by such individual, Hindu undivided
family, co-operative, association, body, authority or company.
[Refer Section 2, Sub section (v) of SEZ Act, 2005]
Who can set up an SEZ Unit

Any person planning to setup a Unit in SEZ for manufacture of goods, rendering of services
including trading shall make a physical application to the concerned Development
Commissioner of SEZ. For the purpose of setting up of Unit in SEZ, an applicant needs to follow
the following procedure :
Procedure for setting up of Unit
Procedure
Step 1 Creating user ID in SEZ Online (https://www.sezonline-ndml.com)
Step 2
Raise a Demand Draft of ₹10,000/- in favour “Pay & Accounts Officer, Ministry of Commerce &
Industry, Department of Commerce, payable at New Delhi”
Step 3
Fill Application in SEZ Online through online mode (real time only). The application contains
details such as applicant name, value of Investment, source of finance, activity to be carried
out, Forex details etc.,

Procedure
Step 4
Once the application is filed Online, the applicant needs to submit the print out (specified in
step 3) of application (hard copy) along with required annexures such as detailed projected
report, copy of affidavit, NOC of PCB, consent letter offering provisional offer of space etc.,
Step 5
Verification of application by Development Commissioner (DC) before forwarding it to the Unit
Approval Committee (UAC) for consideration
Step 6 Attend for personal hearing as notified in the SEZ Online
Step 7
After receipt of application by UAC, it scrutinizes and then decides either to:
a. Approve the application with modifications, or
b. Approve the application without modifications, or
c. Reject the application

Procedure
If application is approved with modifications, the Unit will be given an opportunity to accept
the suggested modifications, if not the application will be rejected.
Applicant can appeal the rejection of UAC to BOA in “Form J” within 30 days of receipt of order
of UAC.
Step 8
Issue of either in-principle Letter of Approval (LOA) or formal Letter of Approval (LOA), if the
application is approved
Step 9
Payment of registration fee of ₹25,000/- (one-time only) to NDML
• In addition to the registration fee, the applicant is required to pay for “System usage
charges” of ₹10,000/- (per annum) which excludes Transaction charges of ₹100/- per
transaction.

Post approval procedures :
• Execution of Bond-cum-legal-Undertaking (BLUT) in “Form H”
• Accepting and complying with terms and conditions of LOA
• Submission of lease deed (for space in SEZ) within 6 months of issuance of LOA
• Intimation of commencement of production/provision of services within 1 year from the
date of LOA
• Submission of periodical returns to DC.

 Validity of LOA for Commencement of authorised operations :
LOA shall be valid for 1 year within which Unit has to commence the production, service or
trading activity which may be further extended to 2 years by DC, provided there are valid reasons
for delay subject to chartered engineer’s certificate providing that 2/3rd of construction has been
completed, is submitted to DC.
 Validity of LOA after Commencement of authorised operations :
LOA shall be valid for 5 years from the date of commencement which will also serve as license for
authorised operations which may be extended to further 5 years, at a time.
 Cancellation of LOA :
The UAC may cancel the LOA if the entrepreneur contravenes any of the terms and conditions or
its obligations subject to which he had been granted the LOA. However, the entrepreneur shall be
given a reasonable opportunity of being heard, prior to such cancellation.
Validity/Extension/Cancellation of LOA

Government of India has come up with certain comprehensive guidelines on how
to apply for setting up of SEZ/SEZ Unit through the SEZ Act and Rules. Though
the procedure appears to be complex, it is a very interesting arena to explore
Conclusion!!

1. EPZ : Export Processing Zone;
2. SEZ : Special Economic Zone;
3. BOA : Board of Approval;
4. UAC : Unit Approval Committee;
5. DC : Development Commissioner;
6. SO : Specified Officer;
7. AO : Authorized Officer;
8. PO : Preventive Officer;
9. EOU : Export Oriented Unit;
10. LOA : Letter of Approval;
11. DTA : Domestic Tariff Area;
12. BLUT : Bond-cum-Legal-Undertaking.
Abbreviations

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Vanam Sauchit
2nd Year Intern
sauchitv@sbsandco.com
040-40183366(115)
SBS Hyderabad
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