SPECIAL ECONOMIC ZONES ACT, 2005
3.
CHAPTER VIII
MISCELLANEOUS
THIRD SCHEDULE: Amendment to Certain Enactments
SPECIAL ECONOMIC ZONES RULES, 2006
CHAPTER I
PRELIMINARY
1. Short title and commencement 53
2. De nitions 53
CHAPTER II
PROCEDURE FOR ESTABLISHMENT OF SPECIAL ECONOMIC ZONE
3. Proposal for setting up of Special Economic Zone 57
3A. Proposal for approval as Co-developer 57
4. Forwarding of proposal to Board 57
5. Requirements for establishment of a Special Economic Zone 57
5A. Infrastructure requirements relating to information technology, Bio-technology, Research and Development facilities, Fabless Semi-conductor Industry and Electronic Manufacturing Services 62
6. Letter of Approval to the Developer 62
6A. Power of Central Government to review letter of approval 64
7. Details to be furnished for issue of noti cation for declaration of an area as Special Economic Zone 64
8. Noti cation of Special Economic Zone 65
9. Grant of Approval for Authorized Operations
10. Permission for procurement of items
11. Processing and non-processing area
11A. Bifurcation of non-processing area
11B. Non-processing areas for Information Technology or Information Technology Enabled Services Special Economic Zones
12. Import and procurement of goods by the Developer 71
13.
14. Procedure applicable on import or procurement of goods and services, their admission and clearance of goods
15. Monitoring 73
16. Transfer of Letter of Approval of Developer 73
CHAPTER III
PROCEDURE FOR ESTABLISHMENT OF A UNIT
17. Proposal for approval of Unit 73
18. Consideration of proposals for setting up of Unit in a Special Economic Zone 74
19. Letter of Approval to a Unit 78
19A. Unit deemed to be in International Financial Services Centre 81
20. Administrative Control of Special Economic Zones 81
21. Offshore Banking Unit 82
21A. Setting up of Unit by Multilateral or Unilateral or International agencies in International Financial Services Centre 82
21B. Units dealing with aircraft or ship leasing activities 82
CHAPTER IV
TERMS AND CONDITIONS FOR GRANT OF PERMISSION TO OPERATE INCLUDING AVAILING EXEMPTIONS, DRAWBACKS AND CONCESSIONS
22. Terms and conditions for availing exemptions, drawbacks and concessions to every Developer and entrepreneur for authorized operations 83
27. Import and Procurement
29A. Procedure of import or export or procurement from or supply to Domestic Tariff Area of aircraft or aircraft engine by a Unit in International Financial Services Centre
29B. Procedure of import or export or procurement from or supply to Domestic Tariff Area of ship by a Unit in International Financial Services Centre 99
30. Procedure for procurements from the Domestic Tariff Area 103
31. [Omitted by the Special Economic Zones (Amendment) Rules, 2018, w.e.f. 19-9-2018] 107
32. [Omitted by the Special Economic Zones (Amendment) Rules, 2018, w.e.f. 19-9-2018] 107
33. Admission of goods
34. Utilization of goods
35. Co-relation of import consignment with corresponding export consignment
36. Filing of documents for admission and removal
37. Duration of goods in a Special Economic Zone
38. Transfer of ownership and removal of goods
39. Destruction of goods
40. Movement of goods to and from non-processing area
41. Sub-contracting
42. Procedure for sub-contracting in Domestic Tariff Area or in a Unit in other Special Economic Zones or in Export Oriented Unit or in Electronic Hardware Technology Park unit or in Software Technology Park Unit or Bio-technology Park Unit or sub-contracting abroad
43. Sub-contracting for Domestic Tariff Area unit for export
44. Contract
46. Procedure for Export
CHAPTER V
CONDITIONS SUBJECT TO WHICH GOODS MAY BE REMOVED FROM A SPECIAL ECONOMIC ZONE TO THE DOMESTIC TARIFF AREA
47. Sales in Domestic Tariff Area
48. Procedure for Sale in Domestic Tariff Area
49. Domestic Tariff Area removals - Abatement of duties in certain cases
50. Temporary Removals to Domestic Tariff Area
51. Procedure for temporary removals in Domestic Tariff Area
52. Other Entitlements
CHAPTER VI
FOREIGN EXCHANGE EARNING - REQUIREMENTS AND MONITORING
53. Net Foreign Exchange Earnings
54. Monitoring of
61.
62.
63.
64.
FORM A: Application for setting up of Special Economic Zone 148
FORM A1: Application Form for Approval of Co-Developer 152
FORM B: Format for Letter of Approval for SEZ Developer 153
FORM B1: 155
FORM C: Format for Letter of Approval for Providing Infrastructure Facilities in SEZ 157
FORM C1: Application for Extension of Validity of Approval Granted under rule 6(2)(a) 158
FORM C2: Application for Extension of Validity of Approval Granted under rule 6(2)(b) 159
FORM C3: Application for seeking change in sector 160
FORM C4: Application for increase in area 161
FORM C5: Application for decrease in area 162
FORM C6: Application Form for Denotification 163
FORM C7: Application for Approval of Authorised Operations 164
FORM D: Bond-cum-legal undertaking for Developer 165
FORM E: Format for quarterly and half-yearly report for S EZ Developer/Co-developer to be furnished to the Development Commissioner 167
FORM F: Consolidated Application Form
FORM F1: Letter of Approval Renewal Application Form 173
FORM F2: Format for Renewal of Letter of Approval for unit 175
FORM G: Format for Letter of Approval for unit 176
FORM H: Bond-cum-legal Undertaking for Special Economic Zone Unit 177
FORM I: Annual Performance Report for Units 180
FORM J: Form for Appeal 183
FORM K: Permanent Identity Card 184
FORM L: Form of legal Undertaking for exit of the unit from Special Economic Zone Scheme 184
ANNEXURE I: Guidelines for annual monitoring or performance of units in special economic zones 185
ANNEXURE II: 186
ANNEXURE III: Development commissioners and the states under their jurisdiction 186
ANNEXURE IV: [Omitted by the Special Economic Zones (Third Amendment) Rules, 2019, w.e.f. 17-12-2019] 187
ANNEXURE IVA: Classi cation of cities 187
SPECIAL ECONOMIC ZONE AUTHORITY RULES, 2009
CHAPTER I
PRELIMINARY
1. Short title and commencement 188
2. De nitions 188
CHAPTER II
TERM OF OFFICE, VACANCY OF THE MEMBERS
3. Term of of ce 188
4. Conveyance and allowances of the nominated members 188
5. Vacancy of the entrepreneur member or their nominee 189
CHAPTER III
POWERS AND FUNCTIONS
6. 189
7. Power of the Authority to Expenditure 190
8. The Development Commissioner who is the Chairperson and the Chief Executive Of cer of the Authority shall 191
CHAPTER IV
APPOINTMENT OF THE OFFICERS AND EMPLOYEES OF THE AUTHORITY
9. 192
CHAPTER V
MEETINGS OF THE AUTHORITY
10. Meetings of the Authority 194
CHAPTER VI
ACCOUNTS, RETURNS AND STATEMENTS OF THE AUTHORITY
11. Accounts of the Authority 195
12. 196
Special Economic Zones Act, 2005 [28
OF 2005]*
An Act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Fifty-sixth Year of the Republic of India as follows:—
CHAPTER I PRELIMINARY
Short title, extent and commencement.
1. (1) This Act may be called the Special Economic Zones Act, 2005.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates1 may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Definitions.
2. In this Act, unless the context otherwise requires,—
(a) “appointed day” with reference to a Special Economic Zone means the date on which the Special Economic Zone is notified by the Central Government under sub-section (1) of section 4;
*Dated 23-6-2005.
1. Notification No. SO 196(E), dated 10-2-2006.— In exercise of the powers conferred by sub-section (3) of section 1 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby appoints the 10th day of February, 2006 as the date on which the following sections of the said Act shall come into force, namely :—
(1) sections 1 to 19 (both inclusive);
(2) sections 25 to 30 (both inclusive);
(3) sections 42 to 58 (both inclusive).
Vide Notification No. SO 2320(E), dated 1-10-2008. In exercise of the powers conferred by sub-section (3) of section 1 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby appoints the 1st day of October, 2008 as the date on which sections 31 to 41 (both inclusive) of the said Act shall come into force.
Notification No. S.O. 75(E), dated 13-1-2010.— In exercise of the powers conferred by sub-section (3) of section 1 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby appoints the 13th January, 2010 as the date on which sections 20, 21 and 22 of the said Act shall come into force.
(b) “Approval Committee” means an Approval Committee constituted under sub-section (1) of section 13;
(
(
c) “authorised operations” means operations which may be authorised under sub-section (2) of section 4 and sub-section (9) of section 15;
d) “Authority” means a Special Economic Zone Authority constituted under sub-section (1) of section 31;
(
e) “Board” means the Board of Approval constituted under sub-section (1) of section 8;
(
f) “Co-Developer” means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (12) of section 3;
(
g) “Developer” means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an authority and a Co-Developer;
(
h) “Development Commissioner” means the Development Commissioner appointed for one or more Special Economic Zones under sub-section (1) of section 11;
(
i) “Domestic Tariff Area” means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones;
(j) “entrepreneur” means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15;
(k) “existing Special Economic Zone” means every Special Economic Zone which is in existence on or before the commencement of this Act;
(l) “existing Unit” means every Unit which has been set up on or before the commencement of this Act in an existing Special Economic Zone;
(m) “export” means—
(i) taking goods, or providing services, out of India from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise; or
(ii) supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer; or
(iii) supplying goods, or providing services, from one Unit to another Unit or Developer, in the same or different Special Economic Zone;
(n) “Free Trade and Warehousing Zone” means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on;
(o) “import” means—
(i) bringing goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode, whether physical or otherwise; or
(ii) receiving goods, or services by a Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone;
(p) “infrastructure facilities” means industrial, commercial or social infrastructure or other facilities necessary for the development of a Special Economic Zone or such other facilities which may be prescribed;
(q) “International Financial Services Centre” means an International Financial Services Centre which has been approved by the Central Government under sub-section (1) of section 18;
(
r) “manufacture” means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining;
(s) “notification” means a notification published in the Official Gazette and the expression “notify” shall be construed accordingly;
(t) “notified offences” means the offences specified as such under sub-section (1) of section 21;
(u) “Offshore Banking Unit” means a branch of a bank located in a Special Economic Zone and which has obtained the permission under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949);
(v) “person” includes an individual, whether resident in India or outside India, a Hindu undivided family, co-operative society, a company, whether incorporated in India or outside India, a firm, proprietary concern, or an association of persons or body of individuals, whether incorporated or not, local authority 2[, trust or any entity as may be notified by the central Government] and any agency, office or branch owned or controlled by such individual, Hindu undivided family, co-operative, association, body, 3[authority, company, trust or entity];
(w) “prescribed” means prescribed by rules made by the Central Government under this Act;
(x) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);
(y) “schedule” means Schedules to this Act;
(z) “services” means such tradable services which,—
(i) are covered under the General Agreement on Trade in Services annexed as IB to the Agreement establishing the World Trade Organisation concluded at Marrakesh on the 15th day of April, 1994; 3
2. Inserted by the Special Economic Zones (Amendment) Act, 2019, w.r.e.f. 2-3-2019.
3. Substituted for “authority or company”, ibid.
(ii) may be prescribed by the Central Government for the purposes of this Act; and
(iii) earn foreign exchange;
(za) “Special Economic Zone” means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-section (1) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone;
(zb) “State Government” means a State Government of the State in which a Special Economic Zone is established or proposed to be established;
(zc) “Unit” means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after the commencement of this Act;
(zd) all other words and expressions used and not defined in this Act but defined in the Central Excise Act, 1944 (1 of 1944), the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Income-tax Act, 1961 (43 of 1961), the Customs Act, 1962 (52 of 1962) and the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992), shall have the meanings respectively assigned to them in those Acts.
SECTION NOTES
2.1 Export definition [Section 2(m)]
Export means:
COMMENTS
Taking goods or providing services out of India from a Special Economic Zone: By land, sea, air, or any other mode. Whether physical or otherwise.
Supplying goods or providing services from the Domestic Tariff Area to a Unit or Developer.
Supplying goods or providing services from one Unit to another Unit or Developer: In the same or a different Special Economic Zone.
2.2 Import definition [Section 2(o)]
Import means:
Bringing goods or receiving services in a Special Economic Zone by a Unit or Developer from a place outside India: By land, sea, air, or any other mode. Whether physical or otherwise.
Receiving goods or services by a Unit or Developer from another Unit or Developer. Of the same Special Economic Zone or a different Special Economic Zone.
2.3 Definition of manufacture [Section 2(r)]
Manufacture means: S. 2
To make, produce, fabricate, assemble, process, or bring into existence a new product: By hand or by machine.
A new product should have a distinctive name, character, or use.
2.3-1 Included processes in manufacture
Manufacture includes process like:
Refrigeration, cutting, polishing, blending, repair, remaking, re-engineering. Agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture, and mining.
2.4 Person definition [Section 2(v)]
“Person” includes:
Individuals:
Whether resident in India or outside India.
A Hindu undivided family.
Co-operative society.
Whether incorporated in India or outside India.
A firm, proprietary concern.
An association of persons or body of individuals, whether incorporated or not.
Local authority.
Trust or any entity as may be notified by the Central Government. Agencies/Offices/Branch includes:
Any agency, office, or branch owned or controlled by: Such individual. Hindu undivided family. Co-operative. Association. Body. Authority. Company.
Trust or entity.
2.5 Services definition [Section (z)]
Service means the tradable services mentioned below:
Services covered under the General Agreement on Trade in Services (GATS): Annexed as IB to the Agreement establishing the World Trade Organisation: Concluded at Marrakesh on the 15th day of April, 1994.
Services that may be prescribed by the Central Government for the purposes of this Act.
Services that earn foreign exchange.
2.6 Special Economic Zone definition [Section (za)]
Special Economic Zone means:
Each Special Economic Zone notified under:
The proviso to sub-section (4) of section 3.
Sub-section (1) of section 4.
Special Economic Zone includes:
Free Trade and Warehousing Zone, and
An existing Special Economic Zone.
2.7 Unit definition [Section (zc)]
A unit means:
A Unit set up by an entrepreneur in a Special Economic Zone. Units include:
An existing Unit.
An Offshore Banking Unit.
A Unit in an International Financial Services Centre: Whether established before or after the commencement of this Act.
CHAPTER II
ESTABLISHMENT OF SPECIAL ECONOMIC ZONE
Procedure for making proposal to establish Special Economic Zone.
3. (1) A Special Economic Zone may be established under this Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or for both or as a Free Trade and Warehousing Zone.
(2) Any person, who intends to set up a Special Economic Zone, may, after identifying the area, make a proposal to the State Government concerned for the purpose of setting up the Special Economic Zone.
(3) Notwithstanding anything contained in sub-section (2), any person, who intends to set up a Special Economic Zone, may, after identifying the area, at his option, make a proposal directly to the Board for the purpose of setting up the Special Economic Zone:
Provided that where such a proposal has been received directly from a person under this sub-section, the Board may grant approval and after receipt of such approval, the person concerned shall obtain the concurrence of the State Government within the period, as may be prescribed.
(4) In case a State Government intends to set up a Special Economic Zone, it may after identifying the area, forward the proposal directly to the Board for the purpose of setting up the Special Economic Zone:
Provided that the Central Government may,—
suo motu set up and notify the Special Economic Zone. S. 3
(a) after consulting the State Government concerned;
(b) without referring the proposal for setting up the Special Economic Zone to the Board; and
(c) after identifying the area,
(5) Every proposal under sub-sections (2) to (4) shall be made in such form and manner containing such particulars as may be prescribed.
(6) The State Government may, on receipt of the proposal made under sub-section (2), forward the same together with its recommendations to the Board within such period as may be prescribed.
(7) Without prejudice to the provisions contained in sub-section (8), the Board may, after receipt of the proposal under sub-sections (2) to (4), approve the proposal subject to such terms and conditions as it may deem fit to impose, or modify or reject the proposal.
(8) The Central Government may prescribe the following requirements for establishment of a Special Economic Zone, namely:—
(a) the minimum area of land and other terms and conditions subject to which the Board shall approve, modify or reject any proposal received by it under sub-sections (2) to (4); and
(
b) the terms and conditions, subject to which the Developer shall undertake the authorised operations and his obligations and entitlements:
Provided that different minimum area of land and other terms and conditions referred to in clause (a) may be prescribed by the Central Government for a class or classes of Special Economic Zones.
(9) If the Board,—
(a) approves without any modification, the proposal received under sub-sections (2) to (4), it shall communicate the same to the Central Government;
(b) approves with modifications the proposal received under sub-sections (2) to (4), it shall, communicate such modifications to the person or the State Government concerned and if such modifications have been accepted by such person or State Government, the Board shall communicate the approval to the Central Government;
(
c) rejects the proposal, received under sub-sections (2) to (4), it shall record the reasons therefor and communicate the rejection to the Central Government which shall intimate to the State Government or the person concerned.
(10) The Central Government shall, on receipt of communication under clause (a) or clause (b) of sub-section (9), grant, within such time as may be prescribed, a letter of approval on such terms and conditions and obligations and entitlements as may be approved by the Board, to the Developer, being the person or the State Government concerned :
Provided that the Central Government may, on the basis of approval of the Board, approve more than one Developer in a Special Economic Zone in cases where one Developer does not have in his possession in the minimum area of contiguous land, as may be prescribed, for setting up a Special Economic Zone and in such cases, each Developer shall be considered as a Developer in respect of the land in his possession. 7
S. 4
(11) Any person who, or a State Government which, intends to provide any infrastructure facilities in the identified area referred to in sub-sections (2) to (4), or undertake any authorised operation may, after entering into an agreement with the Developer referred to in sub-section (10), make a proposal for the same to the Board for its approval and the provisions of sub-section (5) and sub-sections (7) to (10) shall, as far as may be, apply to the said proposal made by such person or State Government.
(12) Every person or State Government referred to in sub-section (11), whose proposal has been approved by the Board and who, or which, has been granted letter of approval by the Central Government, shall be considered as a Co-Developer of the Special Economic Zone.
(13) Subject to the provisions of this section and the letter of approval granted to a Developer, the Developer may allocate space or built up area or provide infrastructure services to the approved units in accordance with the agreement entered into by him with the entrepreneurs of such units.
COMMENTS
CASE LAWS
Land allotment for SEZ without prior selection or auction - The petitioner, a retired municipal employee, challenged the allotment of government land for the establishment of a Special Economic Zone (SEZ) at Jaipur through a Memorandum of Understanding (MoU) between the Government of Rajasthan and M/s Mahindra and Mahindra Ltd. He contended that the State had bypassed the procedure of notifying the SEZ area and selecting a developer as required under the Rajasthan Special Economic Zones Development Act, 2003. The High Court held that with the enactment of the Special Economic Zones Act, 2005, a new centralized procedure under section 3 had been introduced, which permits any person to directly propose an SEZ to the State Government or the Board of Approval after identifying land, without necessitating prior identification by the government or a public auction. The Court found that the land allotment to RIICO, a public-sector undertaking, and then to the project company Mahindra World City (Jaipur) Ltd., was done transparently under a public-private partnership, with clear lease conditions allowing resumption by authorities in case of breach. It rejected the allegation of favoritism and dismissed the petition, emphasizing that the SEZ establishment aligned with national economic objectives and was not a clandestine or arbitrary act. – Mohan Lal Sharma v. Union of India AIR 2007 RAJASTHAN 244.
Establishment of Special Economic Zone and approval and authorisation to operate to, Developer.
4. (1) The Developer shall, after the grant of letter of approval under subsection (10) of section 3, submit the exact particulars of the identified area referred to in sub-sections (2) to (4) of that section, to the Central Government and thereupon that Government may, after satisfying that the requirements, under sub-section (8) of section 3 and other requirements, as may be prescribed, are fulfilled, notify the specifically identified area in the State as a Special Economic Zone:
9
Provided that an existing Special Economic Zone shall be deemed to have been notified and established in accordance with the provisions of this Act and the provisions of this Act shall, as far as may be, apply to such zone accordingly:
Provided further that the Central Government may, after notifying the Special Economic Zone, if it considers appropriate, notify subsequently any additional area to be included as a part of that Special Economic Zone.
(2) After the appointed day, the Board may, authorise the Developer to undertake in a Special Economic Zone, such operations which the Central Government may authorise.
Guidelines for notifying Special Economic Zone.
5. The Central Government, while notifying any area as a Special Economic Zone or an additional area to be included in the Special Economic Zone and discharging its functions under this Act, shall be guided by the following, namely:—
(a) generation of additional economic activity;
(b) promotion of exports of goods and services;
(
c) promotion of investment from domestic and foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities; and
(f) maintenance of sovereignty and integrity of India, the security of the State and friendly relations with foreign States.
Processing and non-processing areas.
6. The areas falling within the Special Economic Zones may be demarcated by the Central Government or any authority specified by it as—
(a) the processing area for setting up units for activities, being the manufacture of goods, or rendering services; or
(b) the area exclusively for trading or warehousing purposes; or
(c) the non-processing areas for activities other than those specified under clause (a) or clause (b).
Exemption from taxes, duties or cess.
7. Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by,—
(i) a Unit in a Special Economic Zone; or
(ii) a Developer,
shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule.
