Rules

Rules / Benefits for SEZ Units

External commercial borrowings by SEZ units up to US$500 million in a year without any maturity restrictions through recognized banking channels. Domestic Sales allowed on payment of full duty subject to import policy in force. Facility to retain 100% foreign exchange receipts in Exchange Earners' Foreign Currency Account. 100% FDI in the manufacturing sector permitted through automatic route, barring a few sectors. Single window clearance for central and state level approvals. In-house customs clearance for export and import cargo. No cap on foreign investment for small scale sector reserved items. Exemption from industrial licensing requirements for items reserved for the SSI sector. No import license requirements. Facility to realize and repatriate export proceeds within 12 months. Job work on behalf of domestic exporters for direct export allowed. Subcontracting both domestic and international is permitted. 100% FDI permitted to SEZ franchisee in providing basic telephone services in SEZs. Facilities to set up off-shore banking units in SEZs. Profits allowed to be repatriated without any dividend-balancing requirement. Exemption from duties on import / procurement of goods for the development, operation and maintenance of SEZ. Flexibility to deploy expatriate staff. Capital gains arising on transfer of assets (machinery, plant, building, land or any rights in buildings or land) on shifting of the industrial undertaking from an urban area to any SEZ would be exempt from capital gains tax. Procurement of technical services or import of technology is exempt from the Research and Development Cess. -

Amendments in 2012
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Instruments executed by / on behalf of / in favor of the developer or units are exempt from stamp duty. Freedom to bring in export proceeds without any time constraint. Flexibility to keep 100% of export proceeds in EEFC account - Freedom to make overseas investment from it. Exemption from interest rate surcharge on import finance. SEZ units allowed to write-off unrealized export bills.

Tax
Exemption from Central Sales Tax and Service Tax. Exemption from customs duties and Central Excise duties on import of capital goods, raw materials, consumables, spares and many such others. 18.5% Minimum Alternate Tax (MAT) on the book profits of Special Economic Zone (SEZ) units. Benefit to carry forward losses for 8 years, thus providing tax shelter on losses incurred in the initial years. An exemption on the payment of dividend distribution tax by the development company or a company engaged in development, operation and maintenance of SEZ.

Timelines
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. SEZ units have to be operational before 1st April 2013 in the existing SEZs for the units to avail profit based incentives.