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SEZ Eligibility

Positive Net Foreign Exchange Earnings (PNFE) to be calculated cumulatively for a period
of five years from the commencement of production according to the following formula:
PNFE: A B => 0
Where
a. FOB Value of Exports + Value of Supplies in the Domestic Market as against Advance
License, DEPB & EPCG schemes and other permissible supplies specified in Rule 53. A
of SEZ Rules, 2006
b. CIF Value of Imports + Value of Procurement from EOU/ EHTP/ STP/ BTP/ Bonded
Warehouses + amortized rate of 10% on capital goods and lump sum payment on
foreign know-how fee, from 1st year to 10th year.
SEZ Act Policy Highlights
Duty free enclaves to be treated as foreign territory for trade operations, duties and tariffs.
Services and manufacturing operations are allowed. Trading also allowed in the Free Trade
Warehousing Zone of the SEZ.
All sale of goods from Domestic Traffic Zone (DTZ) to the SEZ units to be treated as
physical exports. DTZ supplier would be entitled to all export benefits.
Setting up of Off-shore Banking Units allowed in SEZs.
In-house Customs Clearance.
No customs duty on import of capital goods related to production, raw material, spare.
No routine cargo examination by customs. Self Certification.
Domestic sales allowed on payment of applicable duty.
Freedom to bring in exports proceeds without any time limit.
Flexibility to keep 100% of export proceeds in Foreign Currency Account.
Duty free goods can be utilized over a period of five years.
Can undertake job work on behalf of domestic exporters or for third county exports.
No minimum export performance required. Only positive Foreign Exchange earner. Foreign
exchange earnings to be at least equal to value of purchases from DTZ.
Support service like banking, post office, clearing agents etc will be provided in Zone
complex.
Performance of the units will be monitored by a committee headed by Development
Commissioner.
SEZ Unit Benefits
IT Exemption (Subject to Minimum Alternative Tax of 18.5%)
100% IT tax holiday for first 5 years
50% for the next 5 years
50% of the profits as is debited to the profits and loss account of the previous year in
respect of which the deduction is to be allowed and credited to a reserve account
Tax structure
A. Corporate Tax of :
30%
B. Surcharge of 10% on (A) :
3%
C. Education Cess of 3% of (A + B): 0.99%

Total saving in an SEZ: A + B + C = 33.99%


Other Fiscal Benefits

Service tax exempted in SEZ


No excise duty on materials brought into SEZ
Exemption of Central Sales Tax paid on domestic purchases
Exemption from all local taxes and Sales tax
Exemption on taxes for building materials
100% exemption from stamp duty & registration charges

Companies Act
Enhanced limit of Rs 2.4 crores per annum allowed for managerial remuneration.
Regional office of Registrar of Companies in SEZs
Exemption from requirement of domicile in India for 12 months prior to appointment as
Director
Sub-contracting
SEZ units may also sub-contract part of their production process abroad and export from
the third country.
SEZ units may sub-contract part of production / process to DTZ units or other EOU / SEZ
units
SEZ units can undertake job-work from DTZ for export
All supplies will be treated as physical exports. Entitlements:

Duty drawback / DEPB


Exemption from Central Excise Duty
Exemption from CST
Exemption from State levies
Discharge of Export performance if any on the suppliers
Income-tax exemption under Section 80-HHC