27 May 2013
Thanks for replying ... ok I understand ,but can u confirm that state name where is zone situated in india,place,and applicability of tax.can we rebate on manufacturing/or development only.
A free trade zone (FTZ) or export processing zone (EPZ), also called foreign-trade zone, formerly free port is an area within which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Free-trade zones are organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade. It is a region where a group of countries has agreed to reduce or eliminate trade barriers. Free trade zones can be defined as labor intensive manufacturing centers that involve the import of raw materials or components and the export of factory products. The world's first Free Trade Zone was established in Shannon, County Clare, Shannon Free Zone.
This was an attempt by the Irish Government to promote employment within a rural area, make use of a small regional airport and generate revenue for the Irish economy. It was hugely successful, and is still in operation today. The number of worldwide free-trade zones proliferated in the late 20th century. In the United States free-trade zones were first authorized in 1934.
Most FTZs located in developing countries: Brazil, Colombia, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, Sri Lanka, Mauritius and Madagascar have EPZ programs.[4] In 1997, 93 countries had set up export processing zones employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people.
Corporations setting up in a zone may be given tax breaks as an incentive. Usually, these zones are set up in underdeveloped parts of the host country; the rationale is that the zones will attract employers and thus reduce poverty and unemployment, and stimulate the area's economy. These zones are often used by multinational corporations to set up factories to produce goods (such as clothing or shoes).
Free trade zones in Latin America date back to the early decades of the 20th century. The first free trade regulations in this region were enacted in Argentina and Uruguay in the 1920s. The Latin American Free Trade Association (LAFTA) was created in the 1960 Treaty of Montevideo by Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay. However, the rapid development of free trade zones across the region dates from the late 1960s and the early 1970s. Latin American Integration Association is a Latin American trade integration association, based in Montevideo.
Free Trade Zones are also known as Special Economic Zones in some countries. Special Economic Zones (SEZs) have been established in many countries as testing grounds for the implementation of liberal market economy principles. SEZs are viewed as instruments to enhance the acceptability and the credibility of the transformation policies and to attract domestic and foreign investment.
In 1999, there were 43 million people working in about 3000 FTZs spanning 116 countries producing clothes, shoes, sneakers, electronics, and toys. The basic objectives of EPZs are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities.
Many in the economic development community and real estate development field have heard much about how the Foreign-Trade Zone program attracts firms of all types to FTZ designated industrial parks and property. Many Foreign-Trade Zone projects have been started with the philosophy of “establish it, and they will come”. The reality is that for FTZ Grantees to receive the economic development benefits they desire, the right choices in many areas must be made. The Foreign-Trade Zone Corporation will guide Grantees and developers so that the best choices are made so that the FTZ project maximizes its potential by attracting prospective companies as well as providing an avenue to providing the maximum benefit to existing companies in the area. One choice that Grantees are faced with is whether or not to expand a Foreign-Trade Zone or reorganize it using the Alternative Site Framework (ASF).
In January 2009, the Foreign-Trade Zones Board adopted a FTZ Board staff proposal to make what it called the Alternative Site Framework (ASF) as a means of designating and managing general-purpose FTZ sites through reorganization. The ASF provides Foreign-Trade Zone Grantees with greater flexibility to meet specific requests for zone status by utilizing the minor boundary modification process. The theory of the ASF is that by more closely linking the amount of FTZ designated space to the amount of space activated with Customs and Border Protection, Zone users would have better and quicker access to benefits. When a FTZ Grantee evaluates whether or not to expand its FTZ project in order to improve the ease in which the Zone may be utilized by existing companies, as well as how it attracts new prospective companies, the Alternative Site Framework (ASF) should be considered. The ASF may be an appropriate option for certain Foreign-Trade Zone projects, but the decision of whether to adopt the new framework and what the configuration of the sites should be will require careful analysis and planning. Regardless of the choice to expand the FTZ project, the sites should be selected and the application should be drafted in such a manner as to receive swift approval, while maximizing benefit to those that locate in the Zone. Successful zone projects are generally the result of a plan developed and implemented by individuals that understand all aspects of the FTZ program.
The Foreign Trade Zone Board (FTZB) approves the reorganization of Foreign Trade Zone (FTZ) 32 under the alternative site framework. The application submitted by its grantee, The Greater Miami Foreign Trade Zone was approved and officially ordered by the FTZB on January 8, 2013. From California, to Oklahoma to North Carolina to New York State, FTZs all across the nation have recently been making use of the flexible opportunities offered by the Alternative Site Framework (ASF) program. The ASF program is designed to serve zone projects that want the flexibility to both attract users/operators to certain fixed sites but also want the ability to serve companies at other locations where the demand for FTZ services arises in the future. FTZ 32 was founded in 1979 and processes over $1 billion in goods with products from more than 65 countries and exported to more than 75 countries worldwide, with speed and efficiency. According to the official order from the FTZB, FTZ 32 existing site 1, Miami Free Zone will be classified as a magnet site.
At present there eight functional Special Economic Zones located at Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Nodia (Uttar Pradesh) in India. Further a Special Economic Zone at Indore ( Madhya Pradesh ) os now ready for operation.
In addition 18 approvals have been given for setting up of SEZ at Positra (Gujarat), Navi Mumbai and Kopata (Maharashtra), Nanguneri (Tamil Nadu), Kulpi and Salt Lake (West Bengal), Paradeep and Gopalpur (Orissa), Bhadohi, Kanpur, Moradabad and Greater Noida (U.P.), Vishakhapatnam and Kakinada (Andhra Pradesh), Vallarpadam/Puthuvypeen (Kerala) Hassan ( Karnataka), Jaipur and Jodhpur ( Rajasthan) on the basis of proposals received from the State Governments.
How can one apply for setting up of SEZs ?
15 copies of application, indicating name and address of the applicant, status of the promoter along with a project report covering the following particulars may be submitted to the Chief Secretary of the State:
Location of the proposed Zone with details of existing infrastructure and that proposed to be established; Its area, distance from the nearest sea port / airport / rail / road head etc. Financial details, including investment proposed, mode of financing and viability of the project. Details of foreign equity and repatriation of dividends etc., if any Whether the Zone will allow only certain specific industries or will be a multi-product Zone.
The State Government shall, forward it along with their commitment to the following to the Department of Commerce, Government of India:
That area incorporated in the proposed Special Economic Zone is free from environmental restrictions; That water, electricity and other services would be provided as required; That the units would be given full exemption in electricity duty and tax on sale of electricity for self generated and purchased power; To allow generation, transmission and distribution of power within SEZ; To exempt from State sales tax, octroi, mandi tax, turnover tax and any other duty/cess or levies on the supply of goods from Domestic Tariff Area to SEZ units; That for units inside the Zone, the powers under the Industrial Disputes Act and other related labour Acts would be delegated to the Development Commissioner and that the units will be declared as a Public Utility Service under Industrial Disputes Act. That single point clearances system and minimum inspections requirement under State Laws/Rules would be provided.
The proposal incorporating the commitments of the State Government will be considered by an Inter-Ministerial Committee in the Department of Commerce. On acceptance of the proposal, a letter of permission will be issued to the applicant.
terms & conditions for setting up of SEZ in india *************************************************
Only units approved under SEZ scheme would be permitted to be located in SEZ.
The SEZ units shall abide by local laws, rules, regulations or bye-laws in regard to area planning, sewerage disposal, pollution control and the like. They shall also comply with industrial and labour laws as may be locally applicable.
Such SEZ shall make security arrangements to fulfill all the requirements of the laws, rules and procedures applicable to such SEZ.
The SEZ should have a minimum area of 1000 hectares and at least 25 % of the area is to be earmarked for developing industrial area for setting up of units.
Minimum area of 1000 hectares will not be applicable to product specific and port/airport based SEZs.
Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will be an integral part of SEZs.
Detailed guidelines on setting up of SEZ in the Private/Joint/State Sector is given in Appendix 14-II.N of Handbook of Procedures Volume I.
facilities Incentive/ Facilities to SEZ Developer ***************************************************
100% FDI allowed for: (a) townships with residential, educational and recreational facilities on a case to case basis, (b)franchise for basic telephone service in SEZ.
Income Tax benefit under ( 80 IA ) to developers for any block of 10 years in 15 years. Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs Exemption from Service Tax /CST. Income of infrastructure capital fund/co. from investment in SEZ exempt from Income Tax Investment made by individuals etc in a SEZ co also eligible for exemption u/s 88 of IT Act Developer permitted to transfer infrastructure facility for operation and maintenance. Generation, transmission and distribution of power in SEZs allowed Full freedom in allocation of space and built up area to approved SEZ units on commercial basis. Authorised to provide and maintain service like water, electricity, security, restaurants and recreation centres on commercial lines.
obligation of the Unit under the Scheme ****************************************
SEZ units have to achieve positive net foreign exchange earning as per the formula given in paragraph Appendix 14-II (para 12.1) of Handbook of Procedures, Vol.1. For this purpose, a Legal Undertaking is required to be executed by the unit with the Development Commissioner.
The units have to provide periodic reports to the Development Commissioner and Zone Customs as provided in Appendix 14-I F of the Handbook of Procedures, Vol.1.
The units are also to execute a bond with the Zone Customs for their operation in the SEZ.
Any company set up with FDI has to be incorporated under the Indian Companies Act with the Registrar of Companies for undertaking Indian operations
incentive/facilities available for SEZ units in india *****************************************************
Following incentive/ facilities to SEZ enterprises:
Customs and Excise :
SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any licence or specific approval.
Duty free import/domestic procurement of goods for setting up of SEZ units.
Goods imported/procured locally duty free could be utilised over the approval period of 5 years.
Domestic sales by SEZ units will now be exempt from SAD.
Domestic sale of finished products, by-products on payment of applicable Custom duty.
Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value.
Income tax :
Physical export benefit
100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter. Reinvestment allowance to the extend of 50% of ploughed back profits Carry forward of losses
Foreign Direct Investment :
100% foreign direct investment is under the automatic route is allowed in manufacturing sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes , cigars and manufactured tobacco substitutes.
No cap on foreign investments for SSI reserved items.
Setting up Off-shore Banking Units allowed in SEZs.
OBU's allowed 100% Income Tax exemption on profit for 3 years and 50 % for next two years.
External commercial borrowings by units up to $ 500 million a year allowed without any maturity restrictions.
Freedom to bring in export proceeds without any time limit.
Flexibility to keep 100% of export proceeds in EEFC account. Freedom to make overseas investment from it.
Commodity hedging permitted.
Exemption from interest rate surcharge on import finance.
SEZ units allowed to 'write-off' unrealized export bills.
Central Sales Tax Act :
Exemption to sales made from Domestic Tariff Area to SEZ units. Income Tax Act:
Service Tax:
Exemption from Service Tax to SEZ units
Environment :
SEZs permitted to have non-polluting industries in IT and facilities like golf courses, desalination plants, hotels and non-polluting service industries in the Coastal Regulation Zone area
Exemption from public hearing under Environment Impact Assessment Notification
Companies Act :
Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration
Agreement to opening of Regional office of Registrar of Companies in SEZs. Exemption from requirement of domicile in India for 12 months prior to appointment as Director.
Drugs and Cosmetics :
Exemption from port restriction under Drugs & Cosmetics Rules.
Sub-Contracting/Contract Farming :
SEZ units may sub-contract part of production or production process through units in the Domestic Traiff Area or through other EOU/SEZ units SEZ units may also sub-contract part of their production process abroad.
Agriculture/Horticulture processing SEZ units allowed to provide inputs and equipments to contract farmers in DTA to promote production of goods as per the requirement of importing countries.
13.Whether SEZs have been exempted from Labour laws?
Normal Labour Laws are applicable to SEZs, which are enforced by the respective state Governments. The state Government have been requested to simplify the procedures/returns and for introduction of a single window clearance mechanism by delegating appropriate powers to Development Commissioners of SEZs.
facilities for Domestic suppliers to Special Economic Zone **********************************************
Supplies from Domestic Tariff Area (DTA) to SEZ to be treated as physical export. DTA supplier would be entitled to :
Drawback/DEPB CST Exemption Exemption from State Levies Discharge of EP if any on the suppliers Income Tax benefit as applicable to physical export under section 80 HHC of the Income Tax Act.
In all SEZ's , the statutory functions are controlled by the Government. Government also controls the operation and maintenance function in the 7 Central Government controlled SEZs. In rest of the operation and maintenance are privatised.
No License is required for imports, including second hand machineries.
noted that: Development Commissioner is the nodal officer for SEZs and help in resolution of problem, if any, faced by the units / developer.
External commercial borrowings by units up to $ 500 million a year allowed without any maturity restrictions For details please see guidelines issued by RBI (F.No. 4(2)/2002-ECB, dated 15.9.2002).
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