EXPORT PROCESSING ZONE (EPZ)

1.INTRODUCTION

A free trade zone (FTZ) or export processing zone (EPZ) is an area of a country

where some normal trade barriers such as tariffs and quotas are eliminated and

bureaucratic requirements are lowered in hopes of attracting new business and

foreign investments. 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, Co. Clare, Ireland 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.

Most EPZs are located in developing countries: Brazil, Indonesia, El Salvador,

China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica,

Honduras, Guatemala, Kenya, and Madagascar have EPZ programs. In 1997, 93

countries had set up export processing zones (EPZs) 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).

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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.

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2. EPZ IN INDIA

The Export Processing Zones in India had gone through four significant stages of

development. The initial stage witnessed the establishment of the Kandla Free

Trade Zone in the city of Gujarat in the year 1965 and the consequent

establishment of the Santacruz Electronics Export Processing Zone. The

limitations faced by these zones are lack of a proper policy and administrative

control, weak infrastructure, limited scope for concessions, and lack of adequate

incentives.

Therefore, the government of India has been setting up various committees to

suggest measures About EPZ in India, in order to check these existing

shortcomings. Moreover, in the year 1980 a new scheme was formulated by the

government known as the Export Oriented Units Scheme to bring about an overall

development in these zones. The second stage witnessed the Oil Price Shock,

which hampered the export activities significantly and led the establishment of a

number of Export Processing Zones to boost the export sector. Thus, Export

Processing Zones were set up in West Bengal, Tamil Nadu, Kerala, Uttar Pradesh

and in Andhra Pradesh and were named as:

Falta Export Processing Zone

Chennai Export Processing Zone

Noida Export Processing Zone

Cochin Export Processing Zone

Visakhapatnam Export Processing Zone

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The third stage witnessed economic liberalization in India and restructuring of the

entire export processing zone framework in the year 1991. The stage incorporated

various measures for example:

More Fiscal Incentives,

Simplification of Policy Provisions

Incorporation of more industries like horticulture, re-engineering, agriculture,

aqua culture

The fourth stage witnessed the introduction of the concept of special economic

zones in the EXIM policy of 1997-2002. Presently, most of the export-processing

zones have been transformed into special economic zones. The special economic

zones extended their scope to include private companies together with the

government organizations and offered space to be used for residential as well as for

industrial purpose. They offer various fiscal and non-fiscal benefits to the

inhabitants in the form of tax exemption, relaxation in duties, and various

incentives to enhance the Indian economy. Some of the most eminent free-trade

and Export Processing Zones in India and their contact details have been listed

below:

Santa Cruz Electronics Export Processing Zone

http://www.seepz.com/

Andheri (East)

Mumbai 400 096,

India

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Tel: 91-22-836 7143

Fax: 91-22-832 1169

Falta Export Processing Zone

http://www.fepz.com/

2nd MSO Building

4th Floor, Room No. 4, Nizam Palace

234/4, A J C Bose Road

Calcutta 700 020, India

Tel: 91-22-247 7923

Fax: 91-33-247

2263

Cochin Export Processing Zone

http://www.cepz.com/

CPZ Administrative Building

Kakkanad, Cochin 682 030, India

Tel: 91-484-422 530, 422 551

Fax: 91-484-422 530

Noida Export Processing Zone

http://www.busdir.com/business/nepz

PHD House, 3rd Floor

Khel Gaon Marg,

5

New Delhi 110 016, India

Tel: 91-11-685 5061

Fax: 91-11-685 5061

Kandla Free Trade Zone

Ghandhidham

Kutch 370 230, India

Tel: 91-2836-521 94

Fax: 91-2836-522 50

Madras Export Processing Zone

http://www.mepz.com/

Administrative Building

GST Road, Tambaram

Chennai 600 045, India

Tel: 91-44-236 8220

Fax: 91-44-236 8218

Visakhapatnam Export Processing Zone

http://ns.stph.net/vepz

Udyog Bhavan Complex,

Shripuram Junction

Visakhapatnam 530 003, India

Tel: 91-891-551 259, 554 577

Fax: 91-891-551 259

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Export Processing Zones (EPZ) Location Map:

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3. How to set-up an Export Oriented Unit

How to set-up an Export Oriented Unit (EOU)?

“How to set-up an Export Oriented Unit (EOU)” is a step-by-step process in 5

parts.

a) Eligibility Criteia

b) Prior to Approval

c) How to apply

d) Approval Procedure

e) After Approval (what to do for commencement of Production)

IN DETAIL

I.   ELIGIBILITY CRITERIA

Who is eligible to become an EOU?

An EOU can be set up by any entrepreneur for manufacturing of goods and also for

rendering services.  An EOU can be set up for repair, reconditioning, re-making 

and re-engineering also.

EOU unit is required to achieve only positive Net Foreign Exchange (NFE) over a

period of  5 years.

EOU can also be set up in the following sectors: -

Agriculture

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Animal Husbandry

Aquaculture

Floriculture

Horticulture

Pisciculture

Viticulture

Poultry or

Sericulture

Conversion of existing DTA/EPCG (Export Promotion Capital Goods) units

to EOU Scheme

Existing DTA units or EPCG units are permitted for conversion into EOU Scheme

as one time option. In case there is an outstanding export commitment under the

EPCG Scheme, it will be sub summed in the export performance (EP) of the unit.

If the unit is having outstanding export commitment under the Advance Licensing

Scheme, it will discharge the same as well, as per its conditions before conversion

into EOU Scheme. However, duties of Customs and Central Excise already

suffered shall not be refunded on conversion into EOU.

II.PRIOR TO APPROVAL

1) Planning your venture:

Is it your own or

Is it with foreign participation and, if so, nature of participation (foreign

investment allowed 100%)

2) What process do you intend to do i.e. Manufacturing, rendering and export

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of services or: -

Agriculture

Animal Husbandry

Aquaculture

Floriculture

Horticulture

Pisciculture

Viticulture

Poultry or

Sericulture

Repair, reconditioning, re-making, re-engineering etc.

3) Technology to be used:

Indigenous/ foreign

Related cost and conditions

4) Feasibility report:

On your own or with help of consultant

5) The finances involved:

Land, structure, buildings etc. (Please note, building construction material is not

exempted from duty).

Capital Goods, machinery etc.

Payment for royalties etc.

Administration and establishment

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Others: like interest on loans, related taxes and levies etc.

6) The current competition overseas:

Main competitors

Demand and price levels.

7) The import laws and other requirements in target markets:

Any fiscal/ non-fiscal barriers, like anti-dumping laws.

Quota restrictions.

Preferential treatment to competitor countries.

8) Location of the Unit:

The first thing before setting up an EOU the entrepreneur has to decide the location

of  unit: -

I. Close to port or rail/ road.

ii. Availability of raw material and

iii. Environment clearance needed if unit is located  within 25 kms of an urban

town

Accordingly the application will be submitted to the concerned Development

Commissioner under whose jurisdiction that state comes.

9) Capital goods, machinery and equipment to be used:

Indigenous or foreign (allowed duty free)

Related cost

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10) The raw materials and other inputs, like consumables etc. that would be

required:

Source (allowed duty free)

Cost

Monthly, quarterly and annual requirements.

11) The production process:

Whether production process requires air-conditioning plant, special furnaces or

kilns etc.

Details and cost. (Please note, air-conditioning equipment  permitted duty free only

if it is essential for production process).

12) The production capacity and spare capacity:

Do you intend to utilize the same by doing sub-contracting work for other export

units in DTA or Export Oriented Units?

Whether you want to get job work done outside the EOU.

Details of sub-contractors.

Related costs.

13) Any by-products turned out in the production process:

Details of by-products

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Whether these would be exported or sold in Domestic Tariff Area (DTA)

14) Effluents or waste-material:

How do you propose to treat these or discharge them.

15) Packaging

Details of packaging (packaging material allowed without payment of duty)

Source

Cost

16) Power:

Whether the normal grid could supply adequate power.

Or there would be a need for a captive power plant.

Cost of power plant

Fuel required for captive power plant (e.g. furnace oil, LPG,  HSD, coal etc.)

(allowed duty free)

17) Other information:

Firm/company should be duly registered and details about Proprietor/Partner/

Directors etc.

A current account with the bank authorized to deal in foreign exchange should be

opened.

Sale tax registration to be obtained from the Sale Tax Department.

Investment details

18) Mandatory clearances from State Government: -Pollution clearance

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certificate.

Approvals of building plan in cases where building is proposed to be constructed.

Registration as a small scale industrial unit, if applicable

Registration under Factories Act.

III. HOW TO APPLY

All applications are to be filed with the concerned Development Commissioner of

Special Economic Zone (For jurisdiction of Development Commissioner)

Appendix 14-I- K

The unit/ promoter has to apply in the application form, to be given in triplicate

given in Handbook of Procedures in Appendix 14-1A ( Please click here )

Project Report including a write up on the background of the promoters

establishing their credentials and standing.

Please see Appendix 14-1B (Please click here) for documents required by the

Development Commissioner for approval.

For sector specific conditions Please see Appendix 14-1C (Please click here)

DD for Rs. 5,000/- drawn in favour of The Pay & Accounts Officer, Ministry of

Commerce and Industry, Department of Commerce, payable at the Central Bank of

India, Udyog Bhavan, New Delhi.

Registration –cum-Membership Certificate (RCMC) should be obtained from the

office of the concerned Development Commissioner.Import Export Code: If the 

unit does not have an Import Export code (IEC), it will apply in the prescribed

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form (Appendix 18-B)  to the Zone Administration for the same.

IV. APPROVAL PROCEDURE

Letter of Permission (LOP)

After submitting the application form and if everything is in order, Letter of

Permission (LOP) is issued by the Zone Administration within 2 weeks after

interview of the promoter by the Approval Committee.  For format of LOP please

see Appendix 14-IE (Please click here)

Legal undertaking (LUT)

A legal undertaking in the prescribed form undertaking to abide by the terms and

conditions of the LOP has to be executed by the unit in format given at Appendix

14-1F .

A Green Card will be issued to the unit by the Zone Administration on request.

Approval from State Government  Agencies:

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V. AFTER APPROVAL

After the approval from the Development Commissioner concerned, the

manufacturing and other activities have to be undertaken under customs bond for

which formal application is to be made to the jurisdictional Assistant

Commissioner/ Deputy Commissioner of the Customs/ Central Excise for issuance

of a Private Custom Bonded Warehouse Licence under section 58 and 65 of the

Customs Act, 1962. The application shall be accompanied by the following

documents/information: -

Copy of notification whereunder the place (proposed location of unit)  has been

declared as warehousing station under section 9 of the Customs Act. In case the

approved place is not a notified warehousing station, a separate application for

issuance of such notification is to be submitted to the Commissioner of Customs

through the jurisdictional Assistant Commissioner/ Deputy Commissioner.

Copy of LOI/LOP issued by Development Commissioner concerned and LUT

accepted by the Development Commissioner.

Details of the premises including ground plan, purchase/rent/lease deed, allotment

letter from Industrial Development Corporation/ Authority (if any)

Details about the constitution of the firm/company including its

Proprietor/Partners/Directors etc.

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Project Report indicating stage wise manufacturing process.

List of raw material, consumables and capital goods etc. required.

Undertaking that cost recovery and other charges shall be paid.

After verification of the premises and relevant documents, the requisite licence

under section 58 and 65 of the Customs Act will be issued by the Assistant

Commissioner/ Deputy Commissioner Customs/ Central Excise on priority basis.

B-17 Bond:

B-17 bond is a multi – purpose surety bond which the unit has to execute with the

Jurisdictional Assistant/ Deputy Commissioner Customs/ Central Excise on a non-

judicial stamp paper of Rs. 300/-. Format of the Bond is prescribed under

Notification No. 6/98 CE (N.T) dt. 2-3-98.

B-17 Bond is a surety bond and in case valid surety cannot be arranged security

@5% of the bond amount has to be furnished. The bond amount shall be equal to

25% of the duty foregone on the capital goods required in the next 5 years plus

duty foregone on the value of raw material for a period of 3 months.

B-17- Bond covers the following activities:-

Duty free import/ procurement of goods as per relevant notification and

warehousing/storage in the unit and their utilization.

Transshipment of import/ export of goods duty free between port of import/ export

and units premises.

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Movement of duty free goods for job work and return.

Temporary clearance for repair and display in exhibitions, testing/ approval etc.

However it dose not cover differential duty amount against advance DTA sale for

which a separate bond is to be executed.

The unit has also to take a Central Excise Manufacture Code No. from the

Superintendent, Central Excise to enable them to sell in the domestic market.

The Development Commissioner is empowered to grant approvals on the

following matters: -

Import of additional capital goods

Enhancement of production capacity

Broad-banding/diversification

Change in name/ constitutions

Change of location/expansion

Extension of validity of LOP/LOI/LOA:

Import of Office equipment:

Merger of two or more EOU/SEZ Units 

Import of spares and accessories of DG sets    

Eligibility certificates for grant of employment visa to low level foreign

technicians to be engaged by EOUs as per Ministry of Home Affairs Letter No.

250227/7/99-F-1 dated 20-9-1999 (Annexure-XI).

Sale of goods in DTA.

De-bonding/ Exit from EOU scheme.

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Approval from State Government   Agencies:

The unit has to secure approval for its wiring and electrical plan from the Electrical

authorities.

It has also to secure power allocation and wiring approval from the State

Electricity Board.

The industrial water supply is undertaken by the

The unit has to take a registration under the State Government Sales Tax Act and

Central Sales Tax Act.

In case the unit already has a registration with the State Sale Tax Department the

address of the additional premises should also be endorsed in the registration

certificate.

The unit has also to take Small Scale Industry (SSI) Registration from the District

Industries Center to apply for State Government’s Investment Subsidy.

In case there are effluents or emissions the unit has to secure approval form the

Pollution Control Board.

Every Zone has a statutory Single Window Clearance Board.

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4.PROCEDURE TO SET UP INDUSTRIES IN SEEPZ

Administrative Support - With a thorough understanding of an entrepreneur's

desire to get down to the business of manufacturing and exporting as soon as

possible, SEEPZ has designed a set of procedure to deal swiftly with all your

Queries, requests or applications.  

Under the Automatic Approval Scheme, Project applications fulfilling the

stipulated conditions are approved by the Development Commissioner within 15

days.  

Project applications falling outside the purview of Automatic Approval Scheme

are approved by the SEEPZ Board of Approvals within 45 days. Swiss Air and

IMR are just two of many instances who can testify to the speed of approvals

given.

The Board is competent to give clearance in respect of industrial approvals, foreign

collaborations, etc. We call it single-window clearance.

The Zone Administration is under the overall charge of the Development

Commissioner and includes Customs and Security Wing, Investment Promotion

Cell and Utilities Wing. The Development Commissioner is able to help you in

quickly getting power supply, water and telephone/ communication facilities.

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5. SEEPZ

(INTRODUCTION)

Santacruz Electronics Export Processing Zone (SEEPZ) is a Special Economic

Zone in Mumbai, India. Situated in the Andheri East area, it is subjected to liberal

economic laws as compared to the rest of India to promote rapid economic growth

using tax and business incentives and attract foreign investment and technology.

Seepz was created in 1973 and was seen as export processing zone. Since then

many other SEZ’s have been created in rest of India. SEEPZ mainly houses

Electronic Hardware Manufacturing Companies, Software Companies and

jewellery exporters of India. More than 40 percent of India’s total jewelry exports

($2,222.31 million) out of $5,210.69 million during year 2006-2007 came from

units within SEEPZ. Despite its name, it is located near to Andheri that lies further

north.

More than 150 units operate in SEEPZ. Prominent companies that have offices

within Seepz include: Navteq, Renaissance Jewellery Ltd, Gitanjali Gems Ltd,

Vaibhav Gems Ltd, and D’damas for Jewelry. IT Companies include Blue Star

InfoTech Ltd,CGI Third ware, Patni Computer Systems, Polaris Software Lab

Limited, Tata Consultancy Services, Geodesic Limited, Trigyn Technologies

Limited, Syntel Limited etc.Buildings in SEEPZ are called Standard Design

Factories(SDF). The SEZ is a high security entry zone. Employees of various

companies need to have permanent SEEPZ gate pass to gain entry. Visitors need

special permits to enter. Due to these hassles government proposed making SEEPZ

a Free Trade Zone (FTZ) in 1999. However, gate pass and visitor pass rules

continue till date. Making SEEPZ a FTZ meant that it would be treated as outside

the customs zone of India. This meant no excise or customs duty will be levied on

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raw material but companies would also not be able to sell their products in

domestic market.

6. GOVERNMENT SCHEMES RELATED TO EPZ /SEZ

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AS SEZ/EPZ is a geographical region that has economic laws that are more liberal

than a country's typical economic laws. An SEZ is a trade capacity development

tool, with the goal to promote rapid economic growth by using tax and business

incentives to attract foreign investment and technology. Today, there are

approximately 3,000 SEZs operating in 120 countries, which account for over US$

600 billion in exports and about 50 million jobs. By offering privileged terms,

SEZs attract investment and foreign exchange, spur employment and boost the

development of improved technologies and infrastructure.

There are 13 functional SEZs and about 61 SEZs, which have been approved

and are under the process of establishment in India.

Most developing countries in the world have recognized the importance of

facilitating international trade for the sustained growth of the economy and

increased contribution to the GDP of the nation. As part of its continuing

commitment to liberalization, the Government of India has also, since the last

decade, adopted a multi-pronged approach to promote foreign investment in India.

The Government of India has pushed ahead with second-generation reforms and

has made several policy changes to achieve this objective.

The SEZ policy was first introduced in India in April 2000, as a part of the Export-

Import (“EXIM”) policy of India. Considering the need to enhance foreign

investment and promote exports from the country and realizing the need that level

playing field must be made available to the domestic enterprises and manufacturers

to be competitive globally, the Government of India in April 2000 announced the

introduction of Special Economic Zones policy in the country deemed to be

foreign territory for the purposes of trade operations, duties and tariffs. To provide

an internationally competitive and hassle free environment for exports, units were

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allowed be set up in SEZ for manufacture of goods and rendering of services. All

the import/export operations of the SEZ units is on self-certification basis. The

units in the Zone are required to be a net foreign exchange earner but they would

not be subjected to any pre-determined value addition or minimum export

performance requirements. Sales in the Domestic Tariff Area by SEZ units are

subject to payment of full Custom Duty and as per import policy in force. Further

Offshore banking units are being allowed to be set up in the SEZs.

The policy provides for setting up of SEZ's in the public, private, joint sector or by

State Governments. It is also being envisaged that some of the existing Export

Processing Zones would be converted into Special Economic Zones. Accordingly,

the Government has converted Export Processing Zones located at Kandla and

Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West

Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida

(Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special

Economic Zones were approved for establishment at Indore (Madhya Pradesh),

Manikanchan – Salt Lake (Kolkata) and Jaipur and have already commenced

operations.

India is one of the first countries in Asia to recognize the effectiveness of the

Export Processing Zone (EPZ) model in promoting exports. Asia’s first EPZ was

set up in Kandla in 1965. With a view to create an environment for achieving rapid

growth in exports, a Special Economic Zone policy was announced in the Export

and Import (EXIM) Policy 2000. Under this policy , one of the main features is

that the designated duty free enclave to be treated as foreign territory only for trade

operations and duties and tariffs. No LICENCE required for import. The

manufacturing, trading or service activities are allowed.

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To provide a stable economic environment for the promotion of Export-import of

goods in a quick, efficient and hassle-free manner, Government of India enacted

the SEZ Act, which received the assent of the President of India on June 23, 2005.

The SEZ Act and the SEZ Rules, 2006 (“SEZ Rules”) were notified on February

10, 2006. The SEZ Act is expected to give a big thrust to exports and consequently

to the foreign direct investment (“FDI”) inflows into India, and is considered to be

one of the finest pieces of legislation that may well represent the future of the

industrial development strategy in India. The new law is aimed at encouraging

public-private partnership to develop world-class infrastructure and attract private

investment (domestic and foreign), boosting economic growth, exports and

employment.

The Ministry of Commerce and Industry lays down the regulations that govern the

setting up and administering of the SEZs. The Central Government is functioning,

while the State Governments play a significant lead role in the development of

SEZs in their respective States by stipulating the conditions to be adhered to by an

SEZ and granting the necessary approvals. The policy framework for SEZs has

been enacted in the SEZ Act and the supporting procedures are laid down in SEZ

Rules.

The Special Economic Zone Act 2005 came into force with effect from 10th

February 2006, with SEZs Rules legally vetted and approved for notification. The

SEZs Rules, inter-alia, provide for drastic simplification of procedures and for

single window clearance on matters relating to central as well as state

governments. Investment of the order of Rs.100, 000 crores over the next 3 years

with an employment potential of over 5 lakh is expected from the new SEZs apart

from indirect employment during the construction period of the SEZs. Heavy

investments are expected in sectors like IT, Pharma, Bio-technology, Textiles,

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Petro-chemicals, Auto-components, etc. The SEZ Rules provides the simplification

of procedures for development, operation, and maintenance of the Special

Economic Zones and for setting up and conducting business in SEZs. This includes

simplified compliance procedures and documentation with an emphasis on self-

certification; single window clearance for setting up of an SEZ, setting up a unit in

SEZs and clearance on matters relating to Central as well as State Governments; no

requirement for providing bank guarantees; contract manufacturing for foreign

principals with option to obtain sub-contracting permission at the initial approval

stage; and Import-Export of all items through personal baggage.

With a view to augmenting infrastructure facilities for export production it has

been decided to permit the setting up of Special Economic Zones (SEZs) in the

public, private, joint sector or by the State Governments. The minimum size of the

Special Economic Zone shall not be less than 1000 hectares. Minimum area

requirement shall, however, not be applicable to product specific and port/airport

based SEZ. This measure is expected to promote self-contained areas supported by

world-class infrastructure oriented towards export production. Any

private/public/joint sector or State Government or its agencies can set up Special

Economic Zone (SEZ).

ADMINISTRATIVE SET UP FOR SEZS:

EPZs is governed by a three tier administrative set up

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a) The Board of Approval is the apex body in the Department,

b) The Unit Approval Committee at the Zonal level dealing with approval of

units in the SEZs and other related issues, and

c) Each Zone is headed by a Development Commissioner, who also heads the

Unit Approval Committee.

APPROVAL MECHANISM OF SEZS

Any proposal for setting up of SEZ in the Private/Joint/State Sector is routed

through the concerned State government who in turn forwards the same to the

Department of Commerce with its recommendations for consideration of the Board

of Approval. On the other hand, any proposals for setting up of units in the SEZ

are approved at the Zonal level by the Approval Committee consisting of

Development Commissioner, Customs Authorities and representatives of State

Government.

Approval given for setting up new SEZs in Private/Joint/State Sector

Approvals have so far been given for setting up of 117 new Special Economic

Zones (including 3 Free Trade Warehousing Zones) spread over 15 States and 2

Union Territories in the Private/Joint Sector or by the State Governments and its

agencies. Of the 117 SEZs approved for establishment, 7 SEZs have already

become operational, 6 SEZs are now getting ready for operation and the other are

at various stages of implementation.

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7. SHORT LOOK ON GOVERNMENT POLICY

 No LICENCE required for import.

Exemption from Central Excise Duty in procurement of capital goods, raw-

materials, consumables spares etc. from the domestic market.

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Exemption from customs duty on import of capital goods, raw materials,

consumables spares etc.

Reimbursement of Central Sales Tax (CST) paid on domestic purchases.

Supplies from DTA to EOUs treated as deemed exports.

Reimbursement of duty paid on furnace oil, procured from domestic oil

companies to EOUs as per the rate of drawback notified by the Directorate

General of Foreign Trade.

100% Foreign Direct Investment permissible.

 Exchange earners foreign currency (EEFC) Account

Facility to retain 100% foreign exchange proceeds in EEFC Account.

Facility to realize and repatriate export proceeds within twelve months.

Further extension in time period can be granted by RBI and their authorized

dealers.

Re-export of imported goods found defective, goods imported from foreign

suppliers on loan basis etc.

Exemption from industrial licensing requirement for items reserved for SSI

sector.

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Profits allowed to be repatriated freely without any dividend balancing

requirement

Access to Domestic Market up to 50% of FOB value of export on concessional

rate of duty.

Duty free goods to be utilized in two years. Further extension granted on

liberal basis.

Job work on behalf of domestic exporters for direct export allowed.

Conversion of existing Domestic Tariff Area (DTA) unit into an EOU

permitted.

Can procure duty-free inputs for supply of manufactured goods to advance

licence holders.

Supply of ITA-I items in the domestic market which would be counted for

fulfillment of NFE.

EOUs in agriculture and horticulture engaged in contract farming may be

permitted to take out duty free goods listed in Appendix 14-I to the fields of

contact farmers for production.

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8. TAX IMPLICATION OF EPZ /SEZs

Special provisions in respect of newly established hundred per cent export-

oriented undertakings.

10B. (1) Subject to the provisions of this section, a deduction of such profits and

gains as are derived by a hundred per cent export-oriented undertaking from the

export of articles or things or computer software for a period of ten consecutive

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assessment years beginning with the assessment year relevant to the previous year

in which the undertaking begins to manufacture or produce articles or things or

computer software, as the case may be, shall be allowed from the total income of

the assessee :

Provided that where in computing the total income of the undertaking for any

assessment year, its profits and gains had not been included by application of the

provisions of this section as it stood immediately before its substitution by the

Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in

this sub-section only for the unexpired period of aforesaid ten consecutive

assessment years:

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The following second proviso shall be inserted to sub-section (1) of section 10B by

the Finance Act, 2002, w.e.f. 1-4-2003:

Provided also* that for the assessment year beginning on the 1st day of April,

2003, the deduction under this sub-section shall be ninety per cent of the profits

and gains derived by an undertaking from the export of such articles or things or

computer software:

Provided also that no deduction under this section shall be allowed to any

undertaking for the assessment year beginning on the 1st day of April, 2010 and

subsequent years.

(2) This section applies to any undertaking which fulfils all the following

conditions, namely:-

(i) It manufactures or produces any articles or things or computer software;

32

(ii) it is not formed by the splitting up, or the reconstruction, of a business already

in existence: Provided that this condition shall not apply in respect of any

undertaking which is formed as a result of the re-establishment, reconstruction or

revival by the assessee of the business of any such undertaking as is referred to in

section 33B, in the circumstances and within the period specified in that section;

(iii) It is not formed by the transfer to a new business of machinery or plant

previously used for any purpose.

Explanation.-The provisions of Explanation 1 and Explanation 2 to sub-section (2)

of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they

apply for the purposes of clause (ii) of that sub-section.

(3) This section applies to the undertaking, if the sale proceeds of articles or things

or computer software exported out of India are received in, or brought into, India

by the assessee in convertible foreign exchange, within a period of six months

from the end of the previous year or, within such further period as the competent

authority may allow in this behalf.

Explanation 1.-For the purposes of this sub-section, the expression "competent

authority" means the Reserve Bank of India or such other authority as is authorized

under any law for the time being in force for regulating payments and dealings in

foreign exchange.

Explanation 2.-The sale proceeds referred to in this sub-section shall be deemed to

have been received in India where such sale proceeds are credited to a separate

account maintained for the purpose by the assessee with any bank outside India

with the approval of the Reserve Bank of India.

33

10[(4) For the purposes of sub-section (1), the profits derived from export of

articles or things or computer software shall be the amount which bears to the

profits of the business of the undertaking, the same proportion as the export

turnover in respect of such articles or things or computer software bears to the total

turnover of the business carried on by the undertaking.]

(5) The deduction under sub-section (1) shall not be admissible for any assessment

year beginning on or after the 1st day of April, 2001, unless the assessee furnishes

in the prescribed form11, along with the return of income, the report of an

accountant, as defined in the Explanation below sub-section (2) of section 288,

certifying that the deduction has been correctly claimed in accordance with the

provisions of this section

(6) Notwithstanding anything contained in any other provision of this Act, in

computing the total income of the assessee of the previous year relevant to the

assessment year immediately succeeding the last of the relevant assessment years,

or of any previous year, relevant to any subsequent assessment year,-

(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1)

of section 36 shall apply as if every allowance or deduction referred to therein and

relating to or allowable for any of the relevant assessment years ending before the

1st day of April, 2001(inserted vide Finance Bill 2003), in relation to any

building, machinery, plant or furniture used for the purposes of the business of the

undertaking in the previous year relevant to such assessment year or any

expenditure incurred for the purposes of such business in such previous year had

been given full effect to for that assessment year itself and accordingly sub-section

(2) of section 32, clause (ii) of sub-section (3) of section 32A, clause

34

(ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second

proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not

apply in relation to any such allowance or deduction;(ii) no loss referred to in sub-

section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so

far as such loss relates to the business of the undertaking, shall be carried forward

or set-off where such loss relates to any of the relevant assessment years ending

before the 1st day of April, 2001(inserted vide Finance Bill 2003);

(iii) No deduction shall be allowed under section 80HH or section 80HHA or

section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of

the undertaking; and

(iv) in computing the depreciation allowance under section 32, the written down

value of any asset used for the purposes of the business of the undertaking shall be

computed as if the assessee had claimed and been actually allowed the deduction in

respect of depreciation for each of the relevant assessment year.

(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall,

so far as may be, apply in relation to the undertaking referred to in this section

as they apply for the purposes of the undertaking referred to in section 80-IA.

(7A) Where any undertaking of an Indian company which is entitled to the

deduction under this section is transferred, before the expiry of the period

specified in this section, to another Indian company in a scheme of

amalgamation or demerger-

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(a) No deduction shall be admissible under this section to the amalgamating or

the demerged company for the previous year in which the amalgamation or the

demerger takes place; and

(b) the provisions of this section shall, as far as may be, apply to the

amalgamated or the resulting company as they would have applied to the

amalgamating or the demerged company if the amalgamation or demerger had

not taken place.";

(c) Sub-section (9) and (9A) shall be omitted with effect from the 1st day of April,

2004;

(d) Explanation I shall be omitted with effect from the 1st day of April, 2004;

(e) After Explanation 3, the following Explanation shall be inserted at the end,

with effect from the 1st day of April, 2003 namely:-

"Explanation 4. - For the purposes of this section, "manufacture or produce"

shall include the cutting and polishing or precious and semiprecious stones.".'.

(Inserted vide Finance Bill 2003)

(8) Notwithstanding anything contained in the foregoing provisions of this section,

where the assessee, before the due date for furnishing the return of income under

sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in

writing that the provisions of this section may not be made applicable to him, the

provisions of this section shall not apply to him for any of the relevant assessment

year.

Explanation 1 - Omitted vide Finance Bill 2003

36

Explanation 2.-For the purposes of this section,-

(I) "Computer software" means-

(a) Any computer programme recorded on any disc, tape, perforated media or other

information storage device; or

(b) Any customized electronic data or any product or service of similar nature as

may be notified by the Board*,

which is transmitted or exported from India to any place outside India by any

means;

(ii) "convertible foreign exchange" means foreign exchange which is for the time

being treated by the Reserve Bank of India as convertible foreign exchange for the

purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any

rules made hereunder or any other corresponding law for the time being in force;

(iii) "export turnover" means the consideration in respect of export 12[by the

undertaking] of articles or things or computer software received in, or brought into,

India by the assessee in convertible foreign exchange in accordance with sub-

section (3), but does not include freight, telecommunication charges or insurance

attributable to the delivery of the articles or things or computer software outside

India or expenses, if any, incurred in foreign exchange in providing the technical

services outside India;

(iv) "hundred per cent export-oriented undertaking" means an undertaking which

has been approved as a hundred per cent export-oriented undertaking by the Board

appointed in this behalf by the Central Government in exercise of the powers

37

conferred by section 1414 of the Industries (Development and Regulation) Act,

1951 (65 of 1951), and the rules made under that Act;

(v) "Relevant assessment years" means any assessment years falling within a

period of ten consecutive assessment years, referred to in this section.]

15[Explanation 3.-For the removal of doubts, it is hereby declared that the profits

and gains derived from on site development of computer software (including

services for development of software) outside India shall be deemed to be the

profits and gains derived from the export of computer software outside India.]

Explanation 4. - For the purposes of this section, "manufacture or produce"

shall include the cutting and polishing of precious and semi-precious stones.'

(Inserted vide Finance Bill 2003)

*

"In exercise of the powers conferred by clause (b) of item (i) of Explanation 2 of

section 10B of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct

Taxes hereby specifies the following Information Technology enabled products or

services, as the case may be, for the purpose of said clauses, namely:

1. Back-office Operations

2. Call Centre’s;

3. Content Development or Animation;

4. Data Processing;

5. Engineering and Design;

6. Geographic Information System Services;

7. Human Resource Services;

38

8. Insurance Claim Processing;

9. Legal Databases;

10. Medical Transcription;

11. Payroll;

12. Remote Maintenance;

13. Revenue Accounting;

14. Support Centre’s, and

9. GROWTH OF EPZ IN INDIA

The EOU Scheme introduced in early 1981, is complementary to the SEZ scheme.

It adopts the same production regime but offers a wider option in location with

reference to factors like source of raw materials, port of export, hinterland

facilities, availability of technological skills, existence of an industrial base, and

39

the need for a large area of land for the project.

Over the last decade, Export Oriented Units have evolved as a major player in the

country's export effort. They have grown consistently at double digit level, and

recorded a growth of about 27.48% during the year 2004-05

cExport Oriented Units (EOUs) now constitute a very important sector in the

country’s Export Production scenario. They have become dominant players in our

export strategy, and their share in the Country’s export performance is about 10%.

The export growth rate of 30% compares very favorably with the National export

growth rate.

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41

42

11. SEEPZ (STRUCTURE OF ORGANISATION)

SEEPZ OFFICERS AS PER GRADE

S.R

no

NAME DESIGNATION

1 Ms. Anita Agnihotri Development

Commissioner

2 Miss. Reshma Lakhani Jt. Development

Commissioner

3 Shri P.S. Raman Dy. Development

Commissioner

4 Shri O.M.Dave Pay & Accounts Officer

5 Shri S.T. Mane Asstt. Development

Commissioner

6 Smt. T. Idiculla E.A . to Development

Commissioner

7 Smt. M. J. Kulkarni Asstt. Development

Commissioner

8 Shri R.V. Ketkar Assistant

9 Smt. Mariamma Chandrabose Stenographer Gr.I.

10 Smt. T.N. Teckchandani Upper Division Clerk

11 Smt. P.S. Yadav Lower Division Clerk

12 Shri B.R. Pawar Duplicating Machine

Operator

13 Shri S.B. Desai Staff Car Driver ( Sr )

43

SEEPZ (STRUCTURE OF EMPLOYEE)

CUSTOM OFFICERS AS PER GRADE

S.R

no

NAME DESIGNATION

1 Shri Pravin Chandra Dy. Commissioner of Customs

2 Shri C. P. Singh Appraising Officer

3 Shri Munna Lal Preventive Supdt.

4 Shri S. R. Suvarna Examiner

5 Shri M. B. Mhatre Preventive Officer

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12. INDUSTRIES IN SEEPZ

AS SEEPZ IS CONSIDERING BEING THE INDIA ‘S LARGEST FINANCE

OPERATING EPZ THE INDUSTIES ARE MAINLY CONSISTS OF AS

FOLLOWS:

1. HARDWARE

2. GEMS AAND JEWELLERY

3. SOFTWARE

4. TRADING

5. MISCELLANEOUS

THE EXPORT ORRIENTED UNITS ARE:

1. AGRO PRODUCTS

2. CHEMICAL PLASTIC AND ALLIED INDUSTIES

3. ELECTRONIC AND HARDWARE

4. ELECTRONIC AND SOFTWARE

5. ENGINEERING INDUSTRIES

6. FOOD AGRICULTURE AND FOREST PRODUCT

7. GARMENTS AND TESXTILE

8. GEMS AND JEWELLERY

9. GRANITES

10.LATHER ANS SPORTS GOODS

11.MINERALS AND ORES

12.TRADING UNITS

13.YARN

45

COMPANIES OF ELECTRONICS AND HARDWARE

46

COMPANIES OF ELECTRONICS AND HARDWARE

47

COMPANIES OF ELECTRONICS AND HARDWARE

48

COMPANIES OF JEMS AND JEWELLERY'S

49

COMPANIES OF JEMS AND JEWELLERY’S

50

COMPANIES OF JEMS AND JEWELLERY’S

51

COMPANIES OF GEMS AND JEWELLERY’S

52

COMPANIES OF GEMS AND JWELLERY’S

53

COMPANIES OF GEMS AND JWELLERY’S

54

COMPANIES OF GEMS AND JEWELLERY

55

COMPANIES OF GEMS AND JEWELLERY

56

COMPANIES OF GEMS AND JEWELLERY

57

ELECTRONIC AND SOFTWARE COMPANIES

58

TRADING COMPANIES

TRADING COMPANIES

59

60

AGRO PRODUCT BASED COMPANIES

61

CHEMICAL, PLASTIC AND ALLIED BASED COMPANIES

ENGINEERING INDUSTRIES

62

GRANITES AND MARBLE COMPANIES

63

LEATHER AND SPORTS COMPANIES

64

LEATHER AND SPORTS COMPANIES

65

13. GROWTH OF SEEPZ (IN TERMS OF EXPORT AND

IMPORT)

66

EXPORT DATA (APR-2008-FEB-2009 /APR-2009-FEB2010)

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ANALSYS OF DATA

The above data of export commodity from seepz is clearly indicating about the

rapid growth of the SEEPZ in terms of export. The above data is of two

consecutive years i.e. 2008 -09, 2009-10 of various commodities (allowed by the

EPZ policy). The commodities like non-ferrous metal, petroleum products and

gems and jewellery’s are exported in large quantity. The growth of non- ferrous

metal is of 183.58% followed by the other commodities by 117.2% and petroleum

products by 58.98%.The gems and jewellery’s has shown a slight upward direction

of 0.59%. The policy of year 2008-09 was mainly focus to increase the export of

average commodities and fabrics which help these product to increase about 2.69%

growth . in totality the seepz as an epz in india has made it own remarkable growth

of 40% in year 08-09 and 88% growth in 09-10.

( note :- the above % growth are in term of US$ in millions )

14. FUNCTION OF EXPORT AND IMPORT IN EPZ

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An Export Processing Zone (EPZ) is a Customs area where one is allowed to

import plant, machinery, equipment and material for the manufacture of export

goods under security, without payment of duty. The imported goods are subject to

customs control at importation, through the manufacturing process, to the time of

sale/export, or duty payment for home consumption.

The whole function is detailed in the question answer format

1. Who is the licence authority of EPZs?

A. EPZs are licence the Ministry of Trade in the different Partner States.

2. Q: What are the importation procedures followed by an importer in the

EPZ?  (Reg. 169)

A. The importer should:

·             Make a declaration of the imported goods in the prescribed Form C 17

·         Execute a security bond using Form CB. 14. The bond secures the duty

amount that would have otherwise been payable at the time of importation.

The bond also takes care of the taxes due in the event the goods are

consumed elsewhere other than the EPZ or disposed off in the     domestic

market without authority

·         Present the imported goods together with Form C 17 to the proper officer

in charge of the EPZ for receipt and deliveries recording

·         Provide examination facilities within the EPZ where imported goods are

examined or verified. The Commissioner may on reasonable grounds direct

a Customs officer to carry out examination of the goods at the port of entry.

3. Q: Who keeps records of goods that go in or out of the EPZ? (Reg. 170)

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A. An operator of an enterprise within an EPZ shall maintain stock records of

the raw materials and the finished products in a monthly return register and

produce the same for inspection by a Customs officer as requested and on a

monthly basis before the fifteenth day of the following month.

· If goods are found missing on inspection, the operator shall be liable to a

penalty equivalent to twice the amount of duty payable.

4. Q: What are the export procedures followed by an operator in the EPZ?

(Reg. 171)

A. Goods intended for exportation from EPZ should be entered using Form C 17

·             A bond for the removal of goods from an EPZ to the port of exportation

shall be executed using Form CB 14

·             The goods together with a copy of the export entry shall be taken to the

port of exportation. If the seals placed by the EPZ officer have been

tampered with, re-examination of goods shall be done by the Customs

officer at the border.

·             A certified copy of Form C 17 confirming that exportation of the goods

has taken place shall be given to the owner for the purposes of security bond

cancellation.

5. Q: What are the procedures followed when moving goods from one EPZ to

another (Reg. 172)

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A. Enter the goods to be moved from one EPZ to another EPZ using Form C 17

·             Execute a bond for the movement of goods from one EPZ to another

EPZ using Form CB. 14.

·             Obtain a certified/endorsed copy of Form C 17from the officer at the

receiving EPZ for the purposes of bond cancellation

·             If the movement of goods is within the EPZ, the person in charge of an

enterprise shall inform the proper officer of such movements of goods.

·             If the movement of goods is within the EPZ, the person in charge of an

enterprise shall inform the proper officer of such movements of goods.

·             Execute a Security bond using form CB14

6. Q: What are the procedures followed when moving plant and machinery

from an EPZ to any other area? (Reg. 173)

A. ·  Plant, machinery and equipment may be removed for repair, servicing or

maintenance, from an EPZ to a Customs territory this seems to be incorrect,

where they shall be accorded    temporary importation facilities and shall be

entered using Form C 17.

·   The form used to execute a security bond in respect of the plant, machinery

and equipment, is Form CB. 10.

7. Q: What is the procedure for waste disposal and destruction? (Reg. 175)

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A.      Waste disposal or destruction may be carried out within an EPZ under the

supervision of the Customs officer. A certificate of destruction must be

issued thereafter by the officer.

.  Normal import procedures are to be applied for waste that the importer may

wish to sell in the home market.

8. Q: Are there specific conditions when transporting EPZ goods (Reg.

177/178)

A. Goods shall be transported in sealed vehicles, except those of exceptionally

heavy or bulky objects authorized by the Commissioner. Small packages and

samples may be transported in any vehicle, in locked boxes made of steel,

sealed by the Customs.

15. FUTURE OF SEEPZ

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SEEPZ, Santacruz Electronics Export Processing Zone, originally was an Export

Processing Zone. Established in 1973, SEEPZ was originally a uni-product zone

exclusively for manufacture and export of electronic items. Later on it was decided

to add some more products to its kitty. In 1987-88 it was decided to permit

manufacture and export of gem and jewellery items. Excepting the fact that gems

and jewellary items like electronic items are of higher value and lower volume and

environment friendly, there is nothing common between SEEPZ's then existing

product profile and the newer ones.

However huge market Potential of gems and jewellery forced the government to

allow the manufacturing of gems and jewellery from EPZ. Government's decision

appears to be correct one as exports from gems and jewellery from SEEPZ far

exceeds software and hardware exports. When a new Special Economic Zone

(SEZ) scheme was introduced in the Export & Import Policy of 2000, SEEPZ was

converted into an SEZ.

SEEPZ-SEZ is constrained because of lack of space. In terms of area, the SEZ has

just111 acres of land and there is not much scope for expansion by acquiring

additional land. Further a lot needs to be done to improve the surrounding traffic

infrastructure, which is further complicated by the ongoing work on Jogeshwari-

Vikhroli Link road. Plans are under way to implement the FSI approval from the

State Government for expansion in the working space and efforts are on for grant

of additional adjoining land for SEZ premises. However it may take some more

time before things are crystallized.

As on now, there are total 188 units, of which, 25 are electronic hardware units, 98

are Gem & Jewellery units and 65 are Software units. There are about 30 Gem &

Jewellery units which are starting their operations in near future.

SEEPZ SEZ has chalked out plans for its future. Its future plans are aimed at

further improvement in the channelization of facilities for further better value

73

addition activities in the Zone. The SEEPZ-SEZ is poised to increase the share of

Indian Gem & Jewellery industry in the International Jewellery market, especially,

the branded departmental stores of USA, Europe and Japan markets.

15. CONCLUSION

Steps taken by the Government to arrest deceleration of export -- (1) Excise duty

reduced across the board by 4% for all products except petroleum products and

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those products where current rate was less than 4%; (2) Interest subvention of 2%

has been provided till 31.3.2009, to the following labor intensive sectors for

exports: Textiles (including Handlooms), Handicrafts, Leather, Gems & Jewellery,

Marine Products and SMEs; (3) Additional funds of Rs.350 crore provided for

export incentive Schemes; (4) All items of handicrafts included in Vishesh Krishi

and Gram Udyog Yojana; (5) Back-up guarantee to ECGC for up to Rs.350 crore;

(6) Rs1,100 crore provided to ensure full refund of claims of CST/Terminal Excise

duty/ Duty drawback on deemed exports; (7) Additional funds of Rs.1400 crore

provided for textile sector to clear the backlog claims of TUF; (8) Export duty on

iron ore fines eliminated, and for lumps, reduced to 5%; (9) Import duty on

naphtha for power sector eliminated; (10) Some pending issues relating to Service

Tax refund on exports – resolved.

SEZs have created employment for large number of unemployed rural youth. Even

in the services sector, 12.5 million sq meters space is expected in the IT/ITES

SEZs which as per the NASSCOM standards translates into 12.5 lakh jobs. It is,

therefore, expected that establishment of SEZs would lead to fast growth of labour

intensive manufacturing and services in the country. The total investment in the

SEZs, as on 30th September 2008 were Rs 93507.93 crore and the total employment

generated so far to 3,62,650 persons

Out of the 531 formal approvals given till date, 174 approvals are for sector

specific and multi product SEZs for manufacture of Textiles & Apparels, Leather

Footwear, Automobile components, Engineering etc. which would involve labor

intensive manufacturing. Exports from SEZs during the year 2000-09 was to the

tune of Rs.66,638 crore with a growth of 92% over 2007-08 (overall growth of

exports of 381% over past four years (2005-06). The export projection for 2008-09

is Rs.1, 25,950 crore.

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BIBLIOGRAPHY

1. http://www.eouindia.gov.in2. http://www.seepz.com3. http://www.infodriveindia.com4. http://commerce.nic.in5. http://www.eac.int/customs/index.

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