This document provides an overview of Special Economic Zones (SEZs) and Export Oriented Units (EOUs) in India and their impact on logistics. It discusses that SEZs are geographical regions with more liberal economic laws to generate economic activity and promote exports and investment. EOUs complement SEZs and can be set up in various locations. The document compares the benefits and tax incentives for SEZs and EOUs and discusses the logistics infrastructure like parks, warehouses, and connectivity that support them. It provides details on policies around subcontracting, exports, and recent updates to SEZ regulations.

1. SEZ & EOU – IMPACT ON LOGISTICS
Group Members:
Kunal Singh 2010C43
Prashant Petkar 2010B43
Tarun Vir Singh 2010B41
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2. AGENDA
• SEZ – an Introduction
• Types of SEZ
• EOU – an Introduction
• How is SEZ different from EOU?
• Comparison of benefits
• Tax benefits
• Logistic parks
• FTWZ
• Logistics infrastructure
• Sub-contracting
• Other policies
• Recent updates
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3. SEZS – AN INTRODUCTION
A Special Economic Zone (SEZ) is a geographical region that has more liberal
economic laws than the ones generally followed in the rest of the country.
The Special Economic Zones Policy
• Announced in April 2000
• An engine for economic growth supported by quality infrastructure
• Attractive fiscal package both at the Central and State level
• Single window clearance
The main objectives of the Act are
• Generation of additional economic activity
• Promotion of exports of goods and services
• Promotion of investment from domestic and foreign sources
• Creation of employment opportunities and development of infrastructure facilities
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4. TYPES OF SEZ
• Multi-product SEZ: Here units may be set up for manufacture of goods /
services falling in two or more different sectors, for trading and
warehousing.
• Sector specific SEZ: This zone would be exclusively for one or more products
/ services in a particular sector.
• Port / Airport SEZ: This kind of SEZ exists in an existing port / airport.
• Free Trading & Warehousing SEZ: The objective of such a zone is to create
trade related infrastructure to facilitate import & export and facilitate trade
transactions in free currency.
In a stand alone Free Trading and Warehousing Zone at least 50% of the
area should be earmarked for developing processing area, free trading and
warehousing for multi products.
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5. SEZS
• Goods landed, handled, manufactured or reconfigured, & re-exported
without intervention from customs authorities.
• When goods are moved to consumers in the rest of the country, they
become subject to the prevailing customs duties.
• SEZs are notified areas with concessions in land and tax rates.
• Provide services like modern automated warehouses and cold
chains, multimodal transport facility, container freight stations, unloading
of cargo for distribution, redistribution, packaging and repackaging.
• Access to cheap capital made available for investments in
infrastructure, enabling them to extend longer credit periods to their
clients and supplementing their working capital.
• No multiple check points and documentation requirements, which would
lead to speedier delivery of cargo.
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6. EOUS – AN INTRODUCTION
The Export Oriented Units (EOUs) Scheme
• Introduced in early 1981
• Complementary to the SEZ scheme
• Offers a wide option in locations with reference to factors like
• Source of raw materials
• Ports of export
• Availability of technological skills
• Existence of an industrial base and
• The need for a larger area of land for the project.
EOUs are mainly concentrated in Textiles and Yarn, Food
Processing, Electronics, Chemicals, Plastics, Granites and Minerals/ Ores.
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7. EOUS – SALIENT FEATURES
• Total Customs & Central excise duty exemption.
• Income tax exemptions (Section 10A, 10B, etc……)
• Reimbursement of Central sales tax (CST) on purchases made
from Domestic Tariff area (DTA)
• Exports through third party permitted
• No restrictions on foreign shareholding and 100% convertibility
of export earnings at market rate
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8. HOW SEZ IS DIFFERENT FROM EOU?
• Units to be located within specified Zones in respect to SEZ, where as for EOU units can
be set up at any prescribed places as declared.
• No minimum investment limit for SEZ, where as for EOU minimum investment limit is Rs.
100 lakhs as on date of commercial production
• Supplies from SEZ to DTA is normal, Whereas for EOU sale within India on payment of
excise duty /customs duty of similar goods is payable and sometimes as a % of normal
customs duty
• In respect to sales (SEZ) no limit, except to have positive net foreign exchange
(NFE), (EOU) sale UPTO 50% (FOB on sales of previous year) in DTA and has to fulfil
positive net foreign exchange.
• Physical exit is necessary in case of de-bonding as SEZ, for EOU unit can exit (de-bond)
with permission of Development Commissioner, on payment of applicable duties.
• SEZ supplier need not pay CST or service tax, EOU has to pay CST or service tax but
eligible for refund.
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9. COMPARISON OF BENEFITS – SEZ VS EOU
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10. TAX BENEFITS IN SEZ
• Deduction from Profits and Gains from export of goods/services as
follows (Section 10AA)
100% income tax exemption for first 5 years
50% income tax exemption for next 5 years
• Exemption from Dividend Distribution Tax
• No import duty on goods imported
• No excise duty on goods procured from DTA (Domestic Tariff Area)
• No service tax on services availed from DTA (Domestic Tariff Area)
• No Central Sales Tax (CST) on goods procured from DTA
(Domestic Tariff Area)
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11. TAX BENEFITS IN EOU
• Imported capital goods are allowed to be warehoused for 5 years.
• B-17 Bond - to take care of the interests of revenue arising out of goods lost in
transit, goods taken into Domestic Tariff Area for job work/ repair/ display etc but not
brought back etc.
• Transhipment of import /export goods between port of import/export and units'
premises; duty-free import/procurement and warehousing/storage in the unit;
movement of duty-free goods for job work and return; temporary clearance for
repair and display in exhibitions, testing/approvals etc.; and transfer from one
warehouse to another.
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12. LOGISTICS PARKS
• By 2012 – 110 logistic parks, 3500 acres, investment $1 billion, located mostly near
industrial hubs.
• Reliance Logistics Ltd (RLL) plans to set up logistics parks within all the upcoming
SEZs being established by the Reliance Industries group.
• Will cater to the entire range of logistic requirements of the SEZs.
• Sri City, a multi-product SEZ in Andhra Pradesh, has set aside about 500 acres in
the tax-free enclave for investors to develop logistics and warehousing
infrastructure.
• Accommodate about 20 large logistics companies
• Signed up with Bangalore-headquartered A S Cargo for developing logistics
infrastructure at an investment of Rs 100 crore.
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13. FTWZ
• FTWZ are aimed at facilitating import and export of goods.
• The Central Government has allowed SEZ developers to offer space for
warehousing and without obtaining prior permission from it.
• Trading and warehousing units located within free trade warehousing
zones, can carry two-way transactions within the domestic market.
• Under the SEZ Act, units in these zones are given 100 per cent tax
exemption on their income for the first five years and 50 per cent in the
next five years.
• FTWZ would be a key Link in Logistic and Global Supply chains –
servicing both the India and the Globe
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14. FTWZ
• All benefits available to the SEZs shall be applicable to the FTWZs
• Each Zone would provide ‘World Class’ Infrastructure for :
• Warehousing for various kinds of products
• Handling and Transportation Equipment
• Commercial office space
• All related utilities –telecom, power, water, etc
• One stop clearance of Import and Export of goods
• Duty Deferment Benefits–Custom Duty deferment benefits for
products requiring longer storage time
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15. OPERATIONAL BENEFITS
• In-house Customs Clearance
• Self-certification for Imports & Exports
• In-house logistics & Warehousing Zone
• Exports can be made directly from the sub-contractor’s premises located
anywhere
• No license required for imports
• Inter-SEZ units job-work and sale allowed
• 24X7 Electricity & Water
• No routine examination of goods by customs in SEZ units
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16. LOGISTICS INFRASTRUCTURE
Connectivity is assured through:
• Rail
• Dedicated rail route made into Multi-modal Logistics Corridor
• Exclusive Rail Infrastructure for SEZ
• Dedicated Rail Sidings
• Dedicated Railway Complex
• Support Infrastructure
• Bonded Transit Warehouse
• Open Storage Space
• Service Equipment
• Wherever the SEZs are landlocked, inland container depots are an integral part of SEZ .
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17. LOGISTICS INFRASTRUCTURE
• Road
• Dedicated Road Corridors of International Standards
• Separate corridor for Sea – Road
• Separate corridor for Sea – Rail
• Exclusive corridor for truck routes
• Separate corridor for non-industrial traffic, primarily be intra-zone Multimodal
Logistics Corridor
• Air
• Temporary in-zone Airstrip
• Dedicated Airport within the Zone
• Additional lighting facility for Night landing
• Nearby Airport Enhancement
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18. LOGISTICS FACILITIES
• Single Product Storage Facilities
• Shared warehousing
• Shared Equipments
• Reduction in custom clearance time and better logistics connectivity leading to
improved delivery time
• Support Facilities and Effective Management
• Container Freight Stations
• Silos
• Cold Storages
• Waterside Infrastructure
• Infrastructure for Ship Repairs
• Docking & Mechanized conversion/fabrication/dismantling
• Synchro-lifts/ship-lifts
• Common facilities for 2-way movement of liquid inputs/ outputs for SEZ units
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19. TAXATION IN A TYPICAL SUPPLY CHAIN OF INDIA
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20. BENEFITS in a SEZ/EOU Unit Developer / Co-developer
No customs duty No customs duty
No excise duty No excise duty
Development stage
No sales tax No sales tax
Operation stage
No service tax No service tax
(Capital goods,
No purchase tax No purchase tax
consumables,
No stamp duty & registration fees No stamp duty & registration fees
components & spares)
No stamp duty on mortgages No stamp duty on mortgages
No electricity duty No electricity duty
Exemption from Income tax
100% for the first 5 years
No income tax for 10 years
Profit stage 50% for the next 5 years
No dividend distribution tax
50% of profits ploughed back for the next 5
years
Reduced cost of infrastructure
Reduced cost of utilities
Reduced cost of raw materials
Results of benefits Reduced cost of capital
Reduced cost of manpower
Operational ease
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Global competitiveness

21. TAX BENEFITS
• Duty free import/domestic procurement of goods for development, operation
and maintenance of SEZ units
• Exemption from Central Sales Tax.
• Exemption from State sales tax and other levies as extended by the
respective State Governments.
• 12.24% Service Tax exempted
• Exemption from customs/excise duties for development and operation of
SEZs.
• The units in the Zone can import duty-free
• Raw material
• Components
• Consumable, spare parts
• Packing material
• Capital items (machinery) are exempted, irrespective of the value
• No license is required for imports, including second hand machineries
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22. LOGISTICS COST BENEFITS
• No excise duty and sales tax on sales by DTA units to SEZ units
• Office of the Development Commissioner of the Zone refunds CST
paid arising out of Inter State Sales or by Domestic purchases
• Loading and unloading costs are cheaper due to service tax
exemptions
• No upper limit on DTA sales in a SEZ
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23. SUB-CONTRACTING
• SEZ unit can undertake job work from a DTA unit for export on the
basis of annual permission by the specified officer.
• Such sub- contract is permissible for the SEZ unit subject to the
condition that the DTA exporter should supply all raw materials.
• The Specified Officer may permit the Unit to export the finished goods
directly from the sub-contractor’s premises.
• A Unit may sub-contract a part of production or production process in
another Unit within the same Special Economic Zone.
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24. OTHER POLICIES
• A company can set up units both in the SEZ and DTA, provided
separate accounting procedures are maintained by the units. A unit in
the DTA cannot export to itself in the SEZ
• Tax benefit if any machinery/plant previously used for any purpose
being transferred to a new business, and the total value of it does not
exceed 20% of the total value
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25. RECENT UPDATES
• MAT was hiked to 18.5%.
• Union Finance minister Pranab Mukherjee said there would be no more
tax-free zones in the country.
• Tax-free zone status in Himachal Pradesh and Uttarakhand was being
withdrawn gradually following opposition by different states.
• From December 2008 till now, the Board of Approval for SEZs had de-
notified or cancelled 33 SEZ projects.
• The Tax Benefit ended in March this year, with the government now
appointed Deloitte to come up with a report to suggest a new inceptive
policy.
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26. The revenue foregone by the Centre in 2009-10 due to tax breaks on export
profits of business entities in tax-free enclaves accounted for Rs 26,976 crore
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27. EXPORT PERFORMANCES OF SEZ
Year Value (Rs. Crore) Growth Rate ( over
previous year )
2003-2004 13,854 39%
2004-2005 18,314 32%
2005-2006 22 840 25%
2006-20007 34,615 52%
2007-2008 66,638 93%
2008-2009 99,689 50%
2009-2010 2,20,711.39 121.40%
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28. THANK YOU
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