Page 252 - DMGT401Business Environment

Unit 11: EXIM Policy

capital goods, free of cost or on loan from clients. SEZ unit may, on the basis of a firm contract Notes
between the parties, source the capital goods from a domestic/foreign leasing company. SEZ
unit shall be a positive Net Foreign Exchange earner. Net Foreign Exchange Earning (NFE) shall
be calculated cumulatively for a period of five years from the commencement of production.
As per the "Special Economic Zones Rules, 2006", notified by the Department of Commerce, in
case a SEZ is proposed to be set up exclusively for electronics hardware and software, including
information technology enabled services, the area shall be ten hectares or more with a minimum
built up processing area of one lakh square meters.
The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and creation
of related infrastructure. A Single Window SEZ approval mechanism has been provided through
a 19 member inter-ministerial SEZ Board of Approval (BoA). The applications duly recommended
by the respective State Governments/UT Administration are considered by this BoA periodically.
All decisions of the Board of approvals are with consensus.
The SEZ Rules provide for different minimum land requirement for different class of SEZs.
Every SEZ is divided into a processing area where alone the SEZ units would come up and the
non-processing area where the supporting infrastructure is to be created.

Approval mechanism: The developer submits the proposal for establishment of SEZ to the
concerned State Government. The State Government has to forward the proposal with its
recommendation within 45 days from the date of receipt of such proposal to the Board of
Approval. The applicant also has the option to submit the proposal directly to the Board of
Approval.

11.2.2 Objectives of SEZ Scheme

The main objectives of the SEZ Act are:
1. Generation of additional economic activity
2. Promotion of exports of goods and services

3. Promotion of investment from domestic and foreign sources
4. Creation of employment opportunities
5. Development of infrastructure facilities

11.2.3 Benefits of SEZ Scheme

It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in
infrastructure and productive capacity, leading to generation of additional economic activity
and creation of employment opportunities.

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs,
including foreign investment include:
1. Duty free import/domestic procurement of goods for development, operation and
maintenance of SEZ units.
2. 100% Income Tax exemption on export income for SEZ units under Section 10AA of the
Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed
back export profit for next 5 years.
3. Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

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