Government of India
Ministry of Finance
Department of Revenue
Procedures Governing Operation of Units in Special Economic Zones
(SEZs) - Reg.
am directed to invite your attention to the above mentioned subject
and to state that the provisions of Export and Import Policy and
Handbook of Procedures relating to the SEZ Scheme have since been
amended vide notification No.39(RE-00)/1997-20002 and Public Notice
No.37(RE-00)/1997-2002 both dated 19-10-2000 of
of India, in the Ministry of Commerce (Directorate General of
Foreign Trade). As the amendments in the Policy and Handbook relating
to SEZ scheme are quite exhaustive, it has been considered necessary
to issue fresh notifications in supersession of the earlier ones.
As such, two notifications (No.137/2000-Cus & 92/2000-CE)
have been issued on 19-10-2000 in supersession of notification
Nos. 79/2000-Cus and 41/2000-CE, both dated 26-5-2000. Copies
of these notifications are enclosed for reference.
The SEZ scheme envisages a simple and transparent policy and procedures
for the promotion of exports with minimum paper work. The scheme
is detailed under paragraphs 9.30 to 9.43 of the Exim Policy and
paragraphs 9.41 to 9.46 of Handbook of Procedures (Vol-1). The
most important feature of the scheme is that the SEZ area shall
deemed to be a foreign territory for the purpose of duties and
taxes. Therefore, goods supplied to SEZ from the Domestic Tariff
Area (DTA) will be treated as deemed exports and goods brought
from SEZ to DTA will be treated as imported goods. It may be seen
from paragraph 9.30 of the EXIM Policy that in any SEZ, goods
may be imported/procured from DTA duty free for the purpose of
manufacture of goods and services, production, processing, assembling,
trading, repair, reconditioning, re-engineering, packaging or
in connection therewith and export thereof. The not
referred to above have been issued to implement the above Policy
provisions. It may be seen that the duty-free import facility
is not applicable to prohibited goods under the EXIM Policy.
details of other salient features of the scheme are given below:-
The SEZ units may import and export through port, airport, land
customs station, ICD, CFS, courier mode (as per courier rules)
and post parcel. The software development units may import and
export through data communication and telecommunication links.
So far as exports through data communication and telecommunication
links is concerned, the procedure and practice being followed
in case of EPZ/STP units may be adopted for SEZ units. As for
imports of software through above modes, the units may be asked
to file the Bill of Entry within 24 hours of such import alongwith
bank attested invoice and other relevant documents for obtaining
notional 'out of charge'. The documents such as invoice etc. in
respect of such import shall be routed through banks. The Director
of the STP/Development Commissioner of SEZ shall certify the value
of such software. Further, in case of such software imports, instructions
issued by RBI, if any, may be followed.
In case of imports, the Bill of Entry with specially stamped endorsement
as "SEZ Cargo" shall be filed with the Assistant Commissioner/Deputy
Commissioner of Customs in the SEZ for assessment. For procurement
of goods from domestic sources by SEZ units, the procedure and
practice being followed in case of EPZ units may be adopted. In
both cases, i.e. both in respect of imported and domestically
procured cargo, the goods may be assessed on the basis of documents
furnished by the units. There will be no physical examination
of goods and ‘out-of-charge’ may be given after verifying the
marks and numbers on the packages only.
When the goods imported are required to be sent to a SEZ located
at a station away from the place of import, the same may be allowed
under normal transit procedure. The unit shall file the Bill of
Entry with the Assistant Commissioner/ Deputy Commissioner of
Customs in-charge of the SEZ on the basis of the transit document.
In case of exports, for assessment of Shipping Bill, the procedure
as applicable to EPZs shall apply mutatis mutandis in case of
SEZs also. There shall be no routine examination of the export
consignment by SEZ customs authorities and export may be allowed
on the basis of self-certification by the units. Likewise, there
will not be any routine examination of the SEZ cargo at the gateway
port. However, whether at the Zone or at gateway port or during
transit of such cargo, the customs authorities may examine the
consignments when there is a specific information/intelligence.
For this purpose, the orders of the Assistant Commissioner/Deputy
Commissioner of Customs will have to be obtained.
The Assistant Commissioner / Deputy Commissioner of Customs may
permit the clearance of goods to DTA without payment of duty for
jobwork/further processing on the basis of a bond furnished by
the unit. The bond will be discharged as and when the goods are
received back after job work/processing. The goods so processed
may be cleared from the jobworker’s premises for export directly,
provided the jobworker is registered with Central Excise and the
procedure as applicable to the EPZ is followed. In such cases,
the bond will be discharged after the proof of export is produced.
Scrap/waste/remnants/rejects generated at the jobworker’s premises
may be cleared therefrom on payment of applicable customs duty
or returned to the SEZ unit.
The SEZ units may also undertake job-work for export on behalf
of DTA units, provided the goods are exported directly from SEZ
units. The export document shall be in the name of the DTA unit.
For such exports, the DTA units will be entitled for refund of
duty paid on the inputs by way of brand rate of duty drawback.
The Assistant Commissioner/Deputy Commissioner of Customs may
also permit removal of moulds, jigs, tool, fixtures, tackles,
instruments, hangers, patterns and drawings without payment of
duty to the premises of the sub-contractors subject to the condition
that such goods are brought back to the unit on completion of
the jobwork within the period specified in this behalf.
Goods may be taken outside the Zone into the DTA temporarily without
payment of duty for the purpose of test, repairs, replacement,
calibration, refining, processing, display or any other process
necessary for manufacture of final product and return thereof
within the period specified in this regard. For this purpose,
the unit shall execute a bond with the Assistant Commissioner/
Deputy Commissioner of Customs. On receipt of the goods back in
the SEZ unit, the bond shall be discharged. In case of failure
of the unit to bring back the goods within the prescribed period,
the unit shall be liable to pay applicable customs duty on such
The Assistant Commissioner/Deputy Commissioner of Customs may
permit clearance of goods to another SEZ/EOU/EPZ/EHTP/STP unit
without payment of duty for repairs, processing, testing or display
and return thereof within the period specified in this regard.
Goods may also be sent to SEZ/EPZ/EOU/EHTP/STP units for the purposes
of manufacture and export therefrom subject to maintenance of
proper accounts by both the receiving and supplying units. For
the above purposes, the unit shall execute a bond with the Assistant
Commissioner/Deputy Commissioner of Customs. The bond shall be
discharged on receipt of the goods back in the SEZ or after they
have been properly accounted for by way of exports. In case of
failure of the unit to bring back the goods within the prescribed
period or failure to account for the goods, the unit shall be
liable to pay applicable customs duty on such goods.
The provisions/facilities referred to in paragraphs 4 to 6 above
shall not apply to the gem and jewellery units in SEZ. However,
these units can receive plain gold, plain silver, plain platinum
jewellery from DTA in exchange of gold/silver/platinum of same
purity and quantity in weight as that of gold/silver/platinum
jewellery as the case may be. The unit shall not be eligible for
any wastage or manufacturing loss against exchange of such machine-made
or hand-made plain jewellery. The DTA unit exchanging the gold/silver/platinum
jewellery with the units in SEZ shall not be allowed any deemed
export benefits. The units may also be permitted to take out gold,
silver or platinum for job-work in the DTA. This is subject to
the condition that they will bring back the jewellery finished
or semi-finished, including studded jewellery containing quantity
and purity equal to the gold/silver/platinum so taken out within
30 days. However, no diamonds, precious stones and semi-precious
stones shall be allowed to be taken out of the zone for sub-contracting.
As in the case of exchange of gold/silver/ platinum for jewellery
of equal quantity and purity, the DTA unit supplying jewellery
against job-work shall not be entitled for deemed export benefits
and the said unit in the Zone shall not be eligible for wastage
or manufacturing loss against such jewellery.
Further, the Assistant Commissioner of Customs or Deputy Commissioner
of Customs may allow:
i) the items of gem and jewellery to be taken out temporarily into DTA without
payment of duty for the purpose of display and to be returned
ii) personal carriage of gold/silver/platinum jewellery or precious or semi-precious
stones or beads and articles as samples upto US$ 1,00,000 for
export promotion tours and temporary display or sale abroad subject
to the condition that the exporter would bring back the jewellery
or the goods or its sale proceeds within 45 days from the date
of departure through normal banking channel;
iii) export of jewellery including branded jewellery for display and sale in
the permitted shops setup abroad, or in the showroom of their
distributors or agents provided that items not sold abroad within
180 days, shall be re-imported within next 45 days;
iv) gem and jewellery units to remove parts & tools of machine temporarily
without payment of duty for the purpose of repair and return thereof.
v) gem and jewellery manufactured in the SEZ to be taken out to the retail outlets
or showrooms set up in the departure lounge at international airports
for sale to a tourist, as defined in the Baggage Rules, 1998,
vi) gem and jewellery manufactured in the SEZ to be sold to a foreign-bound
passenger and to be transferred to the retail outlets or showrooms
set up in the departure lounge or Customs warehouse at international
airports for being handed over to the said passenger for the purpose
vii). Removal of moulds, tools, patterns, and drawings into the DTA for jobwork
without payment of duty and to be returned to the unit thereafter.
procedure and practice being followed in case of EPZ units may
be adopted while allowing clearances of items mentioned at (i)
to (vii) above.
In case of gem & jewellery units, scrap, dust or sweepings
generated in the unit may be allowed to be forwarded to the Government
Mint or Private Mint for conversion into standard gold bars and
return thereof to the Zone subject to the observance of procedure
laid down by the Customs. The said dust, scrap or sweepings may
also be allowed clearance into DTA on payment of applicable customs
duty on the gold content in the said scrap, dust or sweepings.
Samples of the sweepings/dust shall be taken at the time of clearance
and sent to mint for assaying. The assessment may be finalized
when the reports are received from the mint.
Inter unit transfer of goods amongst units in a SEZ shall not
require any permission, but the supplying and receiving units
shall maintain proper accounts of the transaction.
A provision has been made in the notifications that duty would
not be levied on capital goods, raw materials, components, waste
or scrap etc. if these goods are destroyed in the presence of
the Customs authorities. The notifications may be referred to
for details. This provision will, however, not apply to gold,
silver, platinum, diamond, precious stones and semi-precious stones.
The officers supervising destruction may ensure that goods are
destroyed fully rendering them unfit for further use and give
certificate to that effect. After destruction of capital goods,
raw materials, components, waste or scrap etc., if the remains
have scrap value, the same may be cleared by the unit in DTA on
payment of duty applicable to scrap.
The Assistant Commissioner/ Deputy Commissioner of Customs may
permit sale of finished goods including by-products and services
and waste/scrap/remnants/rejects etc. in the DTA on payment of
applicable customs duty and in accordance with the Export-Import
Policy in force. However, where such finished goods (including
rejects, waste and scrap materials) are not excisable, customs
duty equal in amount to that leviable on the inputs imported/indigenously
procured under the notifications and used for the purpose of manufacture
of such finished goods, which would have been paid but for the
exemption under the said notifications, shall be payable at the
time of clearance of such finished goods. In case of service sector
SEZ units, the rendering of services in DTA may be allowed subject
to the condition that the unit has achieved the positive NFEP,
cumulatively, at the time of rendering such service in DTA as
specified in the Policy. This would mean that service units will
not be eligible for making DTA sale if the NFEP is not positive
cumulatively at any point of time. Further, it may be noted that
if any of such services are taxable under provisions of Chapter
V of Finance Act, 1994, then rendering of such services in DTA
shall be subject to payment of service tax as per the provisions
of Finance Act, 1994.
The DTA clearance referred to in paragraph 12.1 above shall not
be available to the trading units. However, the trading units
in the SEZ may be allowed to clear the imported/indigenously procured
goods in the DTA without payment of duty to other SEZ/EOU/EPZ/EHTP/STP
units. Further, they may be allowed to clear the said goods without
payment of duty, if such clearance is against Advance Licences
or special duty free entitlements.
The units may be allowed to dispose of obsolete or unusable capital
goods, spares and other goods in the DTA on payment of applicable
customs duty. Such disposal shall, however, be subject to the
conditions of Import Policy in force. In case of capital goods,
clearance may be allowed on payment of applicable customs duty
on the depreciated value thereof and at the rate in force on the
date of payment of such duty. In case of other goods (including
empty cones, bobbins, containers suitable for repeated use) clearance
shall be allowed on payment of applicable customs duty on the
value at the time of import and at rates in force on the date
of payment of such duty. However, no duty shall be charged on
clearance of used packing materials such as cardboard boxes, polyethylene
bags of a kind unsuitable for repeated use. Paragraph 5 of the
notifications may be referred to for further details.
Under the SEZ scheme, the goods cleared from the Zone will be
treated as imported goods. Therefore, in case of DTA clearances,
though the duty charged will be central excise duty, this duty
will be equal to the aggregate of all duties of customs. In other
words, the SEZ units will have to pay full customs duty (applied
duty) on their DTA clearances. In view of this, in case of sale/clearance
of goods referred to in the preceding paragraphs, the valuation
will be made as per the provisions of the Customs Act, 1962 and
the Customs Valuation Rules, 1988. Further, the DTA sales will
be subjected to the same assessment and examination procedure
as applicable to imported goods. Licences, wherever applicable,
will have to be produced before clearing the goods into DTA.
A SEZ unit shall maintain proper account in the format convenient
to it and financial year-wise, of all foreign exchange inflow
by way of exports and other receipts, all foreign exchange out
flow on account of imports, payment of dividend, royalty, fees
etc., consumption and utilisation of the materials and sale in
the DTA. The unit shall submit regularly quarterly statement to
the Development Commissioner and the Customs in this regard in
the format prescribed at Appendix 16H of the Hand Book of Procedures.
In case of gem and jewellery, a monthly statement shall be submitted
as prescribed in the said Appendix 16H to the Development Commissioner
and the Customs.
Paragraph 9.40 of the EXIM Policy has been amended to provide
that all activities of the SEZ unit, unless otherwise specified,
will be through self-certification procedure and shall be monitored
by a Committee comprising Development Commissioner and Customs.
The Committee shall be headed by the Development Commissioner.
It will also see that wastage/manufacturing loss on gold/silver/platinum
jewellery and articles are within the overall percentage prescribed
in paragraph 8.28 of Handbook (Vol-1). In case of higher wastage/manufacturing
loss, the Committee shall satisfy itself of the reasonableness
of the same.
The Commissioner of Customs may kindly ensure that the Customs
officials posted in SEZs do not visit the units for verification
of records or even otherwise in routine. However, in case of specific
information/ intelligence which, prima facie, show that there
is fraud, collusion, mis-declaration, suppression of information
etc having a bearing on the export performance of the unit or
where there is specific information regarding clandestine/unauthorized
removal of goods into DTA etc, the Customs officials may visit
the units for verification of records, goods etc. so as to initiate
proceedings under Customs Act, 1962. The Assistant Commissioner/Deputy
Commissioner may keep a watch on the export performance of the
units and in the event of non-achievement of positive NFEP within
the stipulated period, action may be taken against the units for
recovery of the duty and interest. Condition 2 of notification
No. 137/2000-Cus. Dated 19.10.2000 and condition 3 of notification
No.52/2000-CE dated 19.10.2000 may be referred to for further
details. So far as utilization of imported/indigenously procured
goods is concerned, the notifications provide that the same shall
be utilized within the period of five years. In case of failure
to utilize the imported / indigenously procured goods within the
period of five years, the unit shall be liable to pay duty on
the said unutilized goods along with the interest at the rate
of 24% per annum from the date of importation or procurement of
the said unutilized goods till the date of payment of such duty.
An existing EPZ unit can opt for SEZ scheme. On conversion, its
previous obligations as an EPZ unit shall be subsumed by its obligations
under the SEZ scheme. The raw materials, components, consumables
and finished goods lying in stock with the unit at the time of
conversion shall be taken as its opening balance under the SEZ
scheme. All un-utilised DTA sale entitlements of the unit shall
cease to exist from the date of conversion as notified by the
Ministry of Commerce and Industry.
In case an existing EPZ unit decides not to work under the SEZ
Scheme, it will have to either debond itself on payment of applicable
duties on unutilised raw materials, depreciated value of capital
goods and other goods imported / procured locally duty free by
such unit or convert itself into an EOU. In both cases, the unit
will have to physically move out of SEZ.
The SEZ units may be allowed to operate under a single all-purpose
bond. As you are aware at present the bond amount (under B-17
bond) is equal to 25% of the duty foregone on the sanctioned requirement
of capital goods plus the duty foregone on raw materials required
for three months. Surety or security equivalent to 5% of the bond
amount in the form of bank guarantee is required to be given.
It has been decided that the SEZ units having a turnover of Rs.
1 crore or more in the preceding financial year may be exempted
from the requirement of furnishing security/surety. This facility
would not be available to the units against whom offence cases
have been proved in a court of law. In case of new units, they
will be required to give surety or security till they achieve
the turnover of Rs.1 crore. Till the new bond is prescribed, the
existing bonding procedure may continue.
The Board’s Circular No. 51/2000-Cus, dated 26-5-2000 stands superceded
by this circular.
Wide publicity may be given by issue of a Public Notice in this
if any, faced in the implementation of the above changes, may
be brought to the notice of the Board at an early date. Kindly
acknowledge receipt of this Circular.