Frequently Asked Questions
What are the exit options for an SEZ Developer?
The SEZ Act provides for transfer of letter of approval in case of a Developer who is unable to discharge his functions,or violates the terms and conditions of the letter of approval or is facing financial hardship.
There is no restriction on transfer of equity in the Developer company, which would provide the investors with an exit option.
Is Foreign Direct Investment (FDI) allowed for establishment of an SEZ?
Foreign Direct Investment, upto 100%, for setting up of SEZ is permissible under automatic route. Wherever approval from Central Government is required, the same can be given by Board of Approval.
However, it should be ensured by the promoter that his equity does not fall below 51%. In case the promoter decides to decrease the shareholding below 51%, then prior approval of BOA must be taken. (Instructions No:23 of Department of Commerce)
How is the built up area for FTWZ determined? Will it cover paved area, walled area, container yard etc.? Is development allowed in phases?
The minimum built up area for FTWZ is 1 lakh sq. mtrs. The paved and walled area, and the container yard will not form part of the built up area. Development can be carried out in phases as well.
Whether sale of land in processing area/non-processing area allowed?
No. Land notified as an SEZ can not be sold. It can only be leased.
Can the residential area in the non-processing area of the SEZs be sold?
No. Land in the SEZ, including the non-processing area, cannot be sold.
Can the car parking area be part of the built-up area for the IT SEZs?
No. The car parking area cannot be counted as part of the built- up area for IT SEZs.
What is the concept of a Co-Developer?
The infrastructure facilities of the SEZs are normally to be developed by the Developer. The developer may, however, desire that certain facilities or certain portions of the SEZ to be developed by another person. Such person willing to set up infrastructure in the SEZ can file an application with the Board of Approval to be considered as Co-Developer, with the consent of the Developer, and will be eligible for similar benefits as the Developer. (Section 3(12) of SEZ Act, 2005)
Are there any limitations or conditions in relation to the support infrastructure in the non-processing area? Can these be used/ accessed by outsiders?
This is considered on case-to-case basis by the Board of Approval. It is expected that the non-processing area facilities should primarily cater to the needs of the SEZ.
What are the kinds of support infrastructure that can be included in an SEZ? Will these be part of the SEZ and will fiscal benefits be available in respect of these facilities?
The SEZs can have business, residential or recreational facilities located in the non-processing area to support the processing area activities. Such activities shall need prior authorization of the BOA. Only those authorized activities approved by the BOA would be eligible for exemption from taxes and duties for the initial establishment of the infrastructure facilities. No duty exemption shall however be available for operation and maintenance of such facilities in non-processing area. [Rule 27(3)]. Details of a activities, which can be approved as authorized activities, in non-processing area, are given in Ministry of Commerce & Industry Notification dated 27.10.2006. In respect of default activities, as given in Ministry of Commerce & Industry Circular No:F.1/153/2007-SEZ dated 22.8.2008, no approval from Board of Approvals is required.
Is there a requirement for a minimum number of tenants in a SEZ?
No. There is no minimum requirement for the number of tenants within an SEZ. The same legal entity can be the developer and can also be one of the units in the SEZ.