SEZ Rules, 2006

PUBLISHED IN PART II, SECTION 3 SUB-
SECTION (i) OF THE GAZETTE
OF INDIA EXTRAORDINARY, DATED THE
10th February, 2006

GOVERNMENT OF INDIA MINISTRY OF
COMMERCE AND INDUSTRY
(DEPARTMENT OF COMMERCE)

NOTIFICATION

New Delhi, the 10 February, 2006

G.S.R.No : 54(E)In exercise of the powers conferred by section 55 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby makes the following rules, namely:—

CHAPTER I
PRELIMINARY

1. Short title and commencement.- (1) These rules may be called theSpecial Economic Zones Rules, 2006.

(2) They shall come into force on the date of their publication in the Official Gazette Published in Gazette of India, Extraordinary, dt. 10-2-2006.

2. Definitions.- (1) In these rules, unless the context otherwiserequires,—

(a) “Act” means the Special Economic Zones Act, 2005 (28 of
2005);

(b)“Advance Licence” means Advance Licence issued under the
Duty Exemption and Remission Scheme of the Foreign Trade Policy and includes advance authorisation;

(c) “Authorised Officer” means an Inspector or Preventive Officer
or Appraiser or Superintendent of Customs posted in the Specialconomic Zone and authorized by the Specified Officer todischarge any of his functions under these rules;

(d) “Bio Technology Park unit” means a unit approved under theBio-Technology Park Scheme of the Foreign Trade Policy;

(e) “capital goods” means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, or for development of Special Economic Zone, including those required for construction, replacement, modernization, technological upgradation or expansion and also include material handling equipment, packaging machinery and equipments, refractories machine tools, equipment and instruments for testing, research and development, quality and pollution control system, for use in manufacturing, construction, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture, and in the services sector;

(f) “component” means one of the parts of a sub-assembly or assembly of which a manufactured product is made up and into which it may be resolved and includes an accessory or attachment to the component;

(g) “consumable” means any item, (including fuels, high speed diesel oil, light diesel oil and other such petroleum products) which is required for a manufacturing process, which may or may not be substantially or totally consumed during a manufacturing process but does not necessarily form part of the end product;

(h) “custodian” means any person referred to in section 45 of the Customs Act, 1962;

(i) “Customs Act” means the Customs Act, 1962 (52 of 1962);

(j) “drawback” means drawback referred to in the Customs Act,1962;

(k) “Duty Entitlement Pass Book Scheme” means the Duty Exemption Pass Book Scheme framed under the Foreign Trade Policy;

(l) “Duty Free Replenishment Certificate” means Duty Free Replenishment Certificate issued under the Foreign Trade Policy;

(m) “Electronic Hardware Technology Park unit” means a unit approved in accordance with the Electronic Hardware Technology Park Scheme framed under the Foreign Trade Policy;

(n) “Export Oriented Unit” means a unit approved in accordance with the Export Oriented Unit Scheme framed under the Foreign Trade Policy; (o) “Foreign Trade Policy” means the Foreign Trade Policy notified from time to time by the Central Government under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992); (p) “Form” means the form appended to these rules;

(q) “Handbook” means the Handbook of Procedures framed under the Foreign Trade Policy;

(r) “Import Trade Control (Harmonized System) Classifications of Export and Import Items” means the items notified from time to time by the Central Government under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);

(s) “infrastructure” means facilities needed for development, operation and maintenance of a Special Economic Zone and includes industrial, business and social amenities like development of land, roads, buildings, sewerage and effluent treatment facilities, solid waste management facilities, port, including jetties, single point moorings, storage tanks and interconnecting pipelines for liquids and gases, Inland Container Depot or Container Freight Station, warehouses, airports, railways, transport system, generation and distribution of power, gas and other forms of energy, telecommunication, data transmission network, information technology network, hospitals, hotels, educational institutions, leisure, recreational and entertainment facilities, residential and business complex, water supply, including desalination plant, sanitation facility;

(t) “Nominated Agency” means—

a) the MMTC Ltd., being a company registered under the Companies Act, 1956 (1 of 1956),

b) the Handicraft and Handloom Export Corporation Limited, being the company registered under the Companies Act, 1956 (1 of 1956),

c) the State Trading Corporation of India Limited, being the company registered under the Companies Act, 1956 (1 of 1956),

d) the Projects and Equipment Corporation of India Limited being the company registered under the Companies Act, 1956 (1 of 1956), and

e) any other agency authorized by the Reserve Bank of India;

(u) “raw material” means—

(a) basic materials which are needed for the manufacture of goods, but which are still in a raw, natural, unrefined or unmanufactured state, and

(b) any materials or goods which are required for the manufacturing process (including catalysts for initial charge), packing material, whether they have actually been previously manufactured or are processed or are still in a raw or natural state;

(v) “Replenishment Licence” means the Replenishment Licence issued under the Foreign Trade Policy;

(w) “section” means the section of the Act;

(x) “Sector” means one or more products or one or more services falling under a category such as engineering, textiles and garments, pharmaceuticals and chemicals, handicrafts, gem and jewellery, electronics hardware and software, including information technology enabled services and bio-technology;

(y) “Software Technology Park unit” means a unit approved under the Software Technology Parks Scheme of the Foreign Trade Policy;

(z) “spares” means a part or a sub-assembly or assembly for substitution, that is ready to replace an identical or similar part or sub-assembly or assembly and includes a component or an accessory;

(za) “Special Economic Zone for multi-product” means a Special Economic Zone for more than one sector where Units may be set up for manufacture of goods falling in two or more sectors or rendering of services falling in two or more sectors or any combination thereof including trading and warehousing.

(zb) “Special Economic Zone for specific sector” means a Special Economic Zone meant exclusively for one or more products in a sector or one or more services in a sector;

(zc) “Special Economic Zone in a port or airport” means a Special Economic Zone in an existing port or airport for manufacture of goods in two or more goods in a sector or goods falling in two or more sectors or for trading and warehousing or rendering of services;

(zd) “Specified Officer” in relation to a Special Economic Zone means Joint or Deputy or Assistant Commissioner of Customs for the time being posted in the Special Economic Zone;

(ze) “status holder” means an exporter recognized under the Foreign Trade Policy.

(zf) “Vacant Land” means the land where there are no functional ports, manufacturing units, industrial activities or structures in which any commercial or economic activity is in progress.

(2) All other words and expressions used in these rules and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act.

CHAPTER II
PROCEDURE FOR ESTABLISHMENT OF
SPECIAL ECONOMIC ZONE

3. Proposal for setting up of Special Economic Zone — Every proposal under sub-sections (2) to (4) of section 3 shall be made in Form ‘A’ and be submitted to the concerned Development Commissioner as specified in Annexure-III, who, within a period of fifteen days, shall forward it to the Board with his inspection report, State Government’s recommendation and other details specified under rule 7. Every proposal under subsections (2) to (4) of section 3 shall be made in Form-A.

3A. Proposal for approval as Co-developer. - The proposal under sub-section (11) of section 3 for providing infrastructural facilities in the Special Economic Zone shall be made in Form A1 to the concerned Development Commissioner, as specified in Annexure III, who, within a period of fifteen days, shall forward it to the Board with his recommendations .

4. Forwarding of proposal to Board — (1) The State Government shall forward the proposals received under sub-sections (2) and (4) of section 3 to the Board of Approval (Deputy Secretary, Ministry of Commerce and Industry, Department of Commerce, Udyog Bhavan, New Delhi110011) alongwith its recommendations, within forty-five days of receipt of such proposal:

Provided that where the Board approves a proposal received under sub-section (3) of section 3, the person shall obtain concurrence of the State Government within six months from the date of such approval.

(2) While forwarding a proposal under sub-rule (1), the State Government shall ensure that the requirements under rule 5 have been complied with and shall attach copies of relevant notifications issued by it in this regard.

5. Requirements for establishment of a Special Economic Zone — (1) The Board may approve as such or modify and approve a proposal for establishment of a Special Economic Zone, in accordance with the provisions of sub-section (8) of section 3, subject to the requirements of minimum area of land and other terms and conditions indicated in subrule (2).

(2) The requirements of minimum area of land for a class or classes of Special Economic Zone in terms of sub-section (8) of section 3 shall be the following, namely:—

(a) A Special Economic Zone for multi product shall have a contiguous area of one thousand hectares or more but not exceeding 5000 hectares: Provided that in case a Special Economic Zone is proposed to be set up in Assam, Meghalaya, Nagaland, Arunachal Pradesh,

Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu and Kashmir, Goa or in a Union Territory, the area shall be two hundred hectares or more : Provided further that at least fifty per cent of the area shall be earmarked for developing the processing area Provided also that the Central Government may consider on merit the clubbing of contiguous existing notified Special Economic Zones notwithstanding that the total area of resultant Special Economic Zone exceeds 5000 hectares.

(b) A Special Economic Zone for a specific sector or for one or more services] or in a port or airport, shall have a contiguous area of one hundred hectares or more:
a Special Economic Zone is proposed to be set up exclusively for electronics hardware and software, including information technology enabled services, the area shall be ten hectares or more with a minimum built up processing area of one lakh square metres: Provided further that in case a Special Economic Zone is proposed to be set up exclusively for handicrafts, the area shall be ten hectares or more.

Provided also that in case a Special Economic Zone is proposed to be set up exclusively for bio-technology, non- conventional energy, including solar energy equipments/cell, or gem and jewellery sectors, the area shall be ten hectares or more with a minimum built up area as under:

(i) forty thousand square meters in case of a Special Economic Zone proposed to be set up exclusively for bio- technology and nonconventional energy sectors, including solar energy equipments/cells but excluding a Special Economic Zone set up for non-conventional energy production and manufacturing;

(c) Special Economic Zone for Free Trade and Warehousing shall have an area of forty hectares or more with a built up area of not less than one lakh square metres:

Provided that in a stand alone Free Trade and Warehousing Zone at least fifty per cent of the area shall be earmarked for developing processing area:

Provided further that a Free Trade and Warehousing Zone may also be set up as part of a Special Economic Zone for multi- product: Provided also that in a Special Economic Zone having area less than one thousand hectares, Free Trade and Warehousing Zone may be permitted with no minimum area requirement but subject to the condition that the maximum area of such Free Trade and Warehousing Zone shall not exceed twenty per cent. of the processing area.

(d) If a Developer subsequent to approval or notification of a Special Economic Zone acquires more contiguous and vacant land which makes the total area available, including the area already notified as Special Economic Zone, more than the minimum area required for another class of SEZ, the Board may consider such cases on a case to case basis for allowing conversion to another class of Special Economic Zone by subs

(3) The requirements of the minimum area of land for the Special Economic Zones—

(a) which had been, before the commencement of these rules,—
(i) recommended by the Board of Approval constituted by the notification of the Government of India, in the Ministry of Commerce and Industry (Department of Commerce) Number 14/1/2001-EPZ dated the 7th August, 2001, and

(ii) approved by the Central Government;
(b) which had acquired or taken possession of the land required for setting up of the Special Economic Zones before the commencement of these rules; and

(c) which are situated in any of the States mentioned under column (2) of the Annexure II to these rules, shall, for each sector under column

(3) of the Annexure II, be such as mentioned in the corresponding entries under column (4) against each such sector situated in the State mentioned under column (2) of the said Annexure II.

(4) The Developer or Co-developer shall have at least twenty-six per cent. of the equity in the entity proposing to create business, residential or recreational facilities in a Special Economic Zone in case such development is proposed to be carried out through a separate entity or a special purpose vehicle being a company formed and registered under the Companies Act, 1956 (1 of 1956).

(5) Before recommending any proposal for setting up of a Special Economic Zone, the State Government shall endeavour that the following are made available in the State to the proposed Special Economic Zone Units and Developer, namely:—

(a) exemption from the State and local taxes, levies and duties, including stamp duty, and taxes levied by local bodies on goods required for authorized operations by a Unit or Developer, and the goods sold by a Unit in the Domestic Tariff Area except the goods procured from domestic tariff area and sold as it is;

(b) exemption from electricity duty or taxes on sale, of self generated or purchased electric power for use in the processing area of a Special Economic Zone;

(c) allow generation, transmission and distribution of power within a Special Economic Zone ;

(d) providing water, electricity and such other services, as may be required by the developer be provider or caused to be provided;

(e) delegation of power to the Development Commissioner under the Industrial Disputes Act, 1947 (No. 14 of 1947) and other related Acts in relation to the Unit;

(f) delegation of power to the Development Commissioner under the Industrial Disputes Act, 1947 (No. 14 of 1947) in relation to the workmen employed by the Developer;

(g) declaration of the Special Economic Zone as a Public Utility Service under the Industrial Disputes Act, 1947 (No. 14 of 1947);

(h) providing single point clearance system to the Developer and unit under the State Acts and rules.

(6) The State Government shall, while recommending a proposal for setting up of Special Economic Zone to the Board indicate whether the proposed area falls under reserved or ecologically fragile area as may be specified by the concerned authority.

(7) The Developer or Co-developer shall have to construct the minimum built up area specified in this rule within a period of ten years from the date of notification of the Special Economic Zone in which at least fifty percent of such area to be constructed within a period of five years from the date of such notification.

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