7.1

(a)

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. 

(b)

Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported.

(c)

SEZ units may be set up for manufacture of goods and rendering of services.

7.2

(a)

SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies and components except prohibited items of exports in ITC (HS). The units may also export by-products, rejects, waste scrap arising out of the production process. Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS) Classification of Export and Import Items.

SEZ units, other than trading/service unit, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer, subject to RBI clearance, if any. 

(b)

SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC(HS). However, any permission required for import under any other law shall be applicable. Goods shall include raw material for making capital goods for use within the unit. The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients.

(c)

SEZ units may procure goods required by it without payment of duty, from bonded warehouses in the DTA set up under the Policy and/or under Section 65 of the Customs Act and from International Exhibitions held in India.

(d)

SEZ units, may import/procure from DTA, without payment of duty, all types of goods for creating a central facility for use by units in SEZ. The Central facility for software development can also be accessed by units in the DTA for export of software.

(e)

Gem & Jewellery units may also source gold/ silver/ platinum through the nominated agencies.

(f)

SEZ units may import/procure goods and services from DTA without payment of duty for setting up, operation and maintenance of units in the Zone.

7.3

SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case the SEZ unit and the domestic/ foreign leasing company shall jointly file the documents to enable import/ procurement of the capital goods without payment of duty.

7.4

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 according to the formula given in Appendix -14-II of the Handbook (Vol-I)

7.5

(a)

The performance of SEZ units shall be monitored by the Unit Approval Committee.

(b)

The performance of SEZ units shall be monitored as per the guidelines given in Appendix 14-II of Handbook (Vol-I).

7.6

The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force.

7.7

(a)

Applications for setting up a unit in SEZ other than proposals for setting up of unit in the services sector (except software and IT enabled services, trading or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per procedure indicated in Annexure to Appendix 14-II of Handbook (Vol-I) . In other cases approval may be granted by the Board of Approval.

(b)

Proposals for setting up units in SEZ requiring Industrial Licence may be granted approval by the Development Commissioner after clearance of the proposal by the SEZ Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits.

7.8

(a)

SEZ unit may sell goods, including by-products, and services in DTA in accordance with the import policy in force, on payment of applicable duty.

(b)

DTA sale by service/trading unit shall be subject to achievement of positive NFE cumulatively. Similarly for units undertaking manufacturing and services/ trading activities against a single LOP, DTA sale shall be subject to achievement of NFE cumulatively.

(c)

The following supplies effected in DTA by SEZ units will be counted for the purpose of fulfilment of positive NFE:

(i)

Supplies effected in DTA in terms of Chapter 8 of the Policy.

(ii)

Supplies made to bonded warehouses set up under the Policy and/or under Section 65 of the Customs Act. 

(iii)

Supplies to other EOU/SEZ/ EHTP/ STP units provided that such goods are permissible for procurement by units.

(iv)

Supplies against special entitlement of duty free import of goods

(v)

Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance

(vi)

Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.

(vii)

Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items indicated in the Appendix 14-II of Handbook. 

7.9

Supplies from DTA to SEZ shall be entitled for the following:

 (a)

DTA supplier shall be entitled for:

(i)

Drawback

Or

DEPB in lieu of Drawback

(ii)

Discharge of Export performance, if any, on the supplier. 

 (b)

SEZ units shall be entitled for:- 

(i)

Exemption from Central Sales Tax;

(ii)

Exemption from payment of Central Excise Duty on all goods eligible for procurement by the unit.

(iii)

Reimbursement of Central Excise Duty, paid on bulk tea procured from the licenced auction centres by the Development Commissioner of concerned zone as long as levy on bulk tea in this regard is in force.

 (iv)

Reimbursement of Duty paid on fuels or any other goods procured from DTA as per the rate of drawback notified by the Directorate General of Foreign Trade from the date of such notification.

(c)

Supplier of precious and semi-precious stones, synthetic stones and processed pearls from Domestic Tariff Area to the units situated in SEZ shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in the Handbook (Vol. I).

(d)

The entitlements under paragraphs (a) and (b) (ii) above shall be available provided the goods supplied are manufactured in India. 

7.10

SEZ unit may also export goods manufactured/software developed by it through a merchant exporter/ status holder recognized under this Policy or any other EOU/SEZ/ EHTP/STP unit.

7.11

(a)

SEZ units may transfer manufactured goods, including partly processed/semi-finished goods and services from one SEZ unit to another SEZ/EOU/ EHTP/STP unit. 

(b)

Goods imported/procured by a SEZ unit may be transferred or given on loan to another unit within the same SEZ which shall be duly accounted for, but not counted towards discharge of export performance. 

(c)

Capital goods imported/procured may be transferred or given on loan to another SEZ/EOU/ EHTP/ STP unit with prior permission of the Development Commissioner and Customs authorities concerned.

(d)

Transfer of goods in terms of sub-paras (a) and (b) above within the same SEZ shall not require any permission but the units shall maintain proper accounts of the transaction. 

Other entitlements of SEZ units are indicated in the Appendix 14-II of the Handbook (Vol-1).