Special Economic Zones – Guidelines for field formations - DGEP
Director General, Export Promotion, has issued instructions to the field formations on taking a proactive approach at the meetings of the Approval Committees for safeguarding the interest of Revenue.
Jurisdiction : DGEP reiterates the Board instructions that in the port cities, the administrative control over the Special Economic Zones falling within the territorial jurisdiction of the Commissioner of Customs shall be with the Commissioner of Customs. At other places, the administrative control over Special Economic Zones shall be with the jurisdictional Commissioner of Central Excise.
Who should attend the approval Committee meetings? Needless to say, the representative of this Department in the Approval Committee shall be from the Commissionerate having jurisdiction.
Officers – please read the law : The officers nominated to the Approval Committee of SEZs should familiarize themselves with the SEZ Act and Rules and instructions.
Verify Customs and excise offence : Officers should verify the past misdeeds of prospective units.
Ensure manufacture and taxable service : Ensure that the unit's process is covered under ‘manufacture' and export of service.
Ensure that ‘unwanted materials' don't enter : It should be ensured that the quantum of raw material/machinery and services required are relevant to authorised operations. Since for activities the setting up of hospitals, hotels and other such social infrastructure, no duty free material is permitted for operation and maintenance of such facilities in terms of sub-rule (3) of Rule 27 of the SEZ Rules, 2006, care should be taken not to allow any duty free material for these purposes. For example, consumer goods such as washing machines cannot be allowed duty free for use in such premises. Similarly, vehicles for transportation cannot be allowed as authorised operations. The nominee of the Department should therefore, carefully examine any proposal for allowing goods for authorised operations based on actual need and in accordance with the law.
Nothing outside : Any activity outside the SEZ cannot be allowed as Authorized Operation. Hence, no duty free material or tax benefit should be allowed for activities like water sewerage / drainage pipelines outside the SEZ or power/telecommunication lines outside SEZ .
Movement of goods to DTA : Field formations (Range / Divisions) should follow the procedure laid down for movement of goods from SEZ to DTA and from DTA to SEZ as mentioned in the Customs Circular No. 29/2006 dated 27.12.2007 on Implementation of Special Economic Zone Act, 2005, and Special Economic Zone Rules, 2006.
Don't forget the walls. No unit should be allowed to start functioning till the walls and specified entry / exit points and the offices of the Development Commissioner (including the Customs officers posted under him) are in place. The processing area should be properly fenced and secured to segregate it from the non-processing area.
How to do fencing? In case of the IT/ ITES /EH/ Biotechnology SEZs the BoA's power to decide manner of fencing and number of entry exit points shall be exercised by the Development Commissioner concerned who shall be kept the BoA ' informed of the decisions in this regard. Wherever, the developers are proposing to create 2.4 meters high wall/chain linked fencing with 0.6 meters barbed wire fencing with single entry/exit points, as was provided in the SEZ Rules 2006 prior to amendment dated 15th March 2007, no separate approval of the BoA shall be required.
Only one gate ! Only one entry/exit gate should be permitted in view of security and revenue loss concerns as well as paucity of Customs Staff for manning the gates unless more gates have been specifically permitted by the BoA .
Service Tax exempted only for services rendered within SEZ ! The SEZ Act and Rules do not permit any exemption to services provided by a SEZ unit to any individual inside an SEZ as it does not get covered under the export of services. Similarly, regarding exemption of service tax on services availed by units / developers in SEZs and regarding taxability of service rendered to an SEZ unit in respect of authorised operations by a DTA service provider in DTA , it may be kept in mind that service tax is exempted only for services rendered within the area of SEZ .
No Cenvat! CENVAT credit is not available for the inputs used in the finished product supplied to “Developer” of SEZ in terms of Rule 6(6) of CENVAT Credit Rules 2004.
Fill up posts with competent officers : all cadre controlling authorities are requested to immediately take action to fill up the posts of Customs Officers in SEZs by posting suitable officers in all SEZs which are in the process of being set up or have become functional. Care should be taken to ensure that the staff so deployed have the necessary experience to carry out the duties required to be performed by them as authorised officer/specified officers and officers are rotated in due course.
DGEP's F.No DGEP / SEZ /473/2006/ Dated: 03.04.2008