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SPECIAL ECONOMIC ZONES ACT

Ministry of Law and Justice

Act nº 28 of 2005


  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter IV
  • Chapter V
  • Chapter VI
  • Chapter VII
  • Chapter VIII
  • Schedules
  • Act nº 28 of 2005

Preamble

THE SPECIAL ECONOMIC ZONES ACT, 2005

[Act, No. 28 of 2005]

[23rd June, 2005]

PREAMBLE

An Act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Fifty-sixth Year of the Republic of India as follows:--

Chapter I

Section 1. Short title, extent and commencement

(1) This Act may be called the Special Economic Zones Act, 2005.

(2) It extends to the whole of India.

(3) It shall come into force on such 1date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

1. Effective dates for sections 20, 21 and 22 is notified as 13.01.2010 vide notification no. S.O.75(E) dated 13.01.2010.


Section 2. Definitions

In this Act, unless the contextotherwise requires,--

(a) "appointed day"with reference to a Special Economic Zone means the date on which the SpecialEconomic Zone is notified by the Central Government under sub-section (1) ofsection 4;

(b) "ApprovalCommittee" means an Approval Committee constituted under sub-section (1)of section 13;

(c) "authorisedoperations" means operations which may be authorised under sub-section (2)of section 4 and sub-section (9) of section 15;

(d) "Authority" meansa Special Economic Zone Authority constituted under sub-section (1) of section31;

(e) "Board" means theBoard of Approval constituted under sub-section (1) of section 8;

(f) "Co-Developer"means a person who, or a State Government which, has been granted by theCentral Government a letter of approval under sub-section (12) of section 3;

(g) "Developer" meansa person who, or a State Government which, has been granted by the CentralGovernment a letter of approval under sub-section (10) of section 3 andincludes an Authority and a Co-Developer;

(h) "DevelopmentCommissioner" means the Development Commissioner appointed for one or moreSpecial Economic Zones under sub-section (1) of section 11;

(i) "Domestic TariffArea" means the whole of India (including the territorial waters andcontinental shelf) but does not include the areas of the Special EconomicZones;

(j) "entrepreneur"means a person who has been granted a letter of approval by the DevelopmentCommissioner under sub-section (9) of section 15;

(k) "existing SpecialEconomic Zone" means every Special Economic Zone which is in existence onor before the commencement of this Act;

(l) "existing Unit"means every Unit which has been set up on or before the commencement of thisAct in an existing Special Economic Zone;

(m) "export" means--

(i) taking goods, or providingservices, out of India, from a Special Economic Zone, by land, sea or air or byany other mode, whether physical or otherwise; or

(ii) supplying goods, orproviding services, from the Domestic Tariff Area to a Unit or Developer; or

(iii) supplying goods, orproviding services, from one Unit to another Unit or Developer, in the same ordifferent Special Economic Zone;

(n) "Free Trade andWarehousing Zone" means a Special Economic Zone wherein mainly trading andwarehousing and other activities related thereto are carried on;

(o) "import" means--

(i) bringing goods or receivingservices, in a Special Economic Zone, by a Unit or Developer from a placeoutside India by land, sea or air or by any other mode, whether physical orotherwise; or

(ii) receiving goods, orservices by a Unit or Developer from another Unit or Developer of the sameSpecial Economic Zone or a different Special Economic Zone;

(p) "infrastructurefacilities" means industrial, commercial or social infrastructure or otherfacilities necessary for the development of a Special Economic Zone or suchother facilities which may be prescribed;

(q) "InternationalFinancial Services Centre" means an International Financial ServicesCentre which has been approved by the Central Government under sub-section (1)of section 18;

(r) "manufacture"means to make, produce, fabricate, assemble, process or bring into existence,by hand or by machine, a new product having a distinctive name, character oruse and shall include processes such as refrigeration, cutting, polishing,blending, repair, remaking, re-engineering and includes agriculture,aquaculture, animal husbandry, floriculture, Horticulture, pisciculture,poultry, sericulture, viticulture and mining;

(s) "notification"means a notification published in the Official Gazette and the expression"notify" shall be construed accordingly;

(t) "notifiedoffences" means the offences specified as such under sub-section (1) ofsection 21;

(u) "Offshore BankingUnit" means a branch of a bank located in a Special Economic Zone andwhich has obtained the permission under clause (a) of sub-section (1) ofsection 23 of the Banking Regulation Act, 1949(10 of 1949);

(v) "person" includesan individual, whether resident in India or outside India, a Hindu undividedfamily, co-operative society, a company, whether incorporated in India or outsideIndia, a firm, proprietary concern, or an association of persons or body ofindividuals, whether incorporated or not, local authority and any agency,office or branch owned or controlled by such individual, Hindu undividedfamily, co-operative, association, body, authority or company;

(w) "prescribed" meansprescribed by rules made by the Central Government under this Act;

(x) "Reserve Bank"means the Reserve Bank of India constituted under section 3 of the Reserve Bankof India Act, 1934(2 of 1934);

(y) "Schedule" meansSchedules to this Act;

(z) "services" meanssuch tradable services which,--

(i) are covered under theGeneral Agreement on Trade in Services annexed as IB to the Agreementestablishing the World Trade Organisation concluded at Marrakesh on the 15thday of April, 1994;

(ii) may be prescribed by theCentral Government for the purposes of this Act; and

(iii) earn foreign exchange;

(za) "Special EconomicZone" means each Special Economic Zone notified under the proviso tosub-section (4) of section 3 and sub-section (1) of section 4 (including FreeTrade and Warehousing Zone) and includes an existing Special Economic Zone;

(zb) "StateGovernment" means a State Government of the State in which a SpecialEconomic Zone is established or proposed to be established;

(zc) "Unit" means aUnit set up by an entrepreneur in a Special Economic Zone and includes anexisting Unit, an Offshore Banking Unit and a Unit in an InternationalFinancial Services Centre, whether established before or established after thecommencement of this Act;

(zd) all other words andexpressions used and not defined in this Act but defined in the Central ExciseAct, 1944(1 of 1944), the Industries (Development and Regulation) Act, 1951(65of 1951), the Income-tax Act, 1961(43 of 1961), the Customs Act, 1962(52 of1962) and the Foreign Trade (Development and Regulation) Act, 1992(22 of 1992)shall have the meanings respectively assigned to them in those Acts.

Chapter II

Section 3. Procedure for making proposal to establish Special Economic Zone

(1) A Special Economic Zone may be established under this Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or for both or as a Free Trade and Warehousing Zone.

(2) Any person, who intends to set up a Special Economic Zone, may, after identifying the area, make a proposal to the State Government concerned for the purpose of setting up the Special Economic Zone.

(3) Notwithstanding anything contained in sub-section (2), any person, who intends to set up a Special Economic Zone, may, after identifying the area, at his option, make a proposal directly to the Board for the purpose of setting up the Special Economic Zone:

Provided that where such a proposal has been received directly from a person under this sub-section, the Board may grant approval and after receipt of such approval, the person concerned shall obtain the concurrence of the State Government within the period, as may be prescribed.

(4) In case a State Government intends to set up a Special Economic Zone, it may after identifying the area, forward the proposal directly to the Board for the purpose of setting up the Special Economic Zone:

Provided that the Central Government may,--

(a) after consulting the State Government concerned;

(b) without referring the proposal for setting up the Special Economic Zone to the Board; and

(c) after identifying the area, suo motu set up and notify the Special Economic Zone.

(5) Every proposal under sub-sections (2) to (4) shall be made in such form, and, manner, containing such particulars as may be prescribed.

(6) The State Government may, on receipt of the proposal made under sub-section (2), forward the same together with its recommendations to the Board within such period as may be prescribed.

(7) Without prejudice to the provisions contained in sub-section (8), the Board may, after receipt of the proposal under sub-sections (2) to (4), approve the proposal subject to such terms and conditions as it may deem fit to impose, or modify or reject the proposal.

(8) The Central Government may prescribe the following requirements for establishment of a Special Economic Zone, namely:--

(a) the minimum area of land and other terms and conditions subject to which the Board shall approve, modify or reject any proposal received by it under sub-sections (2) to (4); and

(b) the terms and conditions, subject to which the Developer shall undertake the authorised operations and his obligations and entitlements:

Provided that different minimum area of land and other terms and conditions referred to in clause (a) may be prescribed by the Central Government for a class or classes of Special Economic Zones.

(9) If the Board --

(a) approves without any modification the proposal received under sub-sections (2) to (4), it shall communicate the same to the Central Government;

(b) approves with modifications the proposal received under sub-sections (2) to (4), it shall, communicate such modifications to the person or the State Government concerned and if such modifications have been accepted by such person or State Government, the Board shall communicate the approval to the Central Government;

(c) rejects the proposal received under sub-sections (2) to (4), it shall record the reasons therefor and communicate the rejection to the Central Government which shall intimate to the State Government or the person concerned.

(10) The Central Government shall, on receipt of communication under clause (a) or clause (b) of sub-section (9), grant, within such time as may be prescribed, a letter of approval on such terms and conditions and obligations arid entitlements as may be approved by the Board, to the Developer, being the person or the State Government concerned:

Provided that the Central Government may, on the basis of approval of the Board, approve more than one Developer in a Special Economic Zone in cases where one Developer does not have in his possession the minimum area of contiguous land, as may be prescribed, for setting up a Special Economic Zone and in such cases, each Developer shall be considered as a Developer in respect of the land in his possession.

(11) Any person who, or a State Government which, intends to provide any infrastructure facilities in the identified area referred to in sub-sections (2) to (4), or undertake any authorised operation may, after entering into an agreement with the Developer referred to in sub-section (10), make a proposal for the same to the Board for its approval and the provisions of sub-section (5) and sub-sections (7) to (10) shall, as far as may be, apply to the said proposal made by such person or the State Government.

(12) Every person or the State Government referred to in sub-section (11), whose proposal has been approved by the "Board and who, or which, has been granted letter of approval by the Central Government, shall be considered as a Co-Developer of the Special Economic Zone.

(13) Subject to the provisions of this section and the letter of approval granted to a Developer, the Developer may allocate space or built up area or provide infrastructure services to the approved Units in accordance with the agreement entered into by him with the entrepreneurs of such Units.

Section 4. Establishment of Special Economic Zone and approval and authorization to operate it to, Developer

(1) The Developer shall, after the grant of letter of approval under sub-section (10) of section 3, submit the exact particulars of the identified area referred to in subsections (2) to (4) of that section, to the Central Government and thereupon that Government may, after satisfying that the requirements, under sub-section (8) of section 3 and other requirements, as may be prescribed, are fulfilled, notify the specifically identified area in the State as a Special Economic Zone:

Provided that an existing Special Economic Zone shall be deemed to have been notified and established in accordance with the provisions of this Act and the provisions of this Act shall, as far as may be, apply to such Zone accordingly:

Provided further that the Central Government may, after notifying the Special Economic Zone, if it considers appropriate, notify subsequently any additional area to be included as a part of that Special Economic Zone.

(2) After the appointed day, the Board may, authorise the Developer to undertake in a Special Economic Zone, such operations which the Central Government may authorise.

Section 5. Guidelines for notifying Special Economic Zone

The Central Government, while notifying any area as a Special Economic Zone or an additional area to be included in the Special Economic Zone and discharging its functions under this Act, shall be guided by the following, namely:--

(a) generation of additional economic activity;

(b) promotion of exports of goods and services;

(c) promotion of investment from domestic and foreign sources;

(d) creation of employment opportunities;

(e) development of infrastructure facilities; and

(f) maintenance of sovereignty and integrity of India, the security of the State and friendly relations with foreign States.

Section 6. Processing and non-processing areas

The areas falling within the Special Economic Zones may be demarcated, by the Central Government or any authority specified by it as--

(a) the processing area for setting up Units for activities, being the manufacture of goods, or rendering services; or

(b) the area exclusively for trading or warehousing purposes; or

(c) the non-processing areas for activities other than those specified under clause (a) or clause (b).

Section 7. Exemption from taxes, duties or cess

Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by,--

(i) a Unit in a Special Economic Zone; or

(ii) a Developer,

shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule.

Chapter III

Section 8. Constitution of Board of Approval

(1) The Central Government shall, within fifteen days of the commencement of this Act, by notification, constitute, for the purposes of this Act, a Board to be called the Board of Approval.

(2) The Board shall consist of--

(a) an officer not below the rank of an Additional Secretary to the Government of India in the Ministry or Department of the Central Government dealing with commerce--Chairperson, ex officio;

(b) two officers, not below the rank of a Joint Secretary to the Government of India, to be nominated by the Central Government to represent the Ministry or Department of the Central Government dealing with revenue--Members, ex officio;

(c) one officer not below the rank of a Joint Secretary to the Government of India to be nominated by the Central Government to represent the Ministry or Department of the Central Government dealing with economic affairs (financial services)-- Member, ex officio;

(d) such number of officers, not exceeding ten, not below the rank of the Joint Secretary to the Government of India, to be nominated by the Central Government to represent the Ministries or Departments of the Central Government dealing with commerce, industrial policy and promotion, science and technology, small scale industries and agro and rural industries, home affairs, defence, environment and forests, law, overseas Indian affairs and urban development--Members, ex officio;

(e) a nominee of the State Government concerned--Member, ex officio;

(f) the Director General of Foreign Trade or his nominee--Member, ex officio;

(g) the Development Commissioner concerned--Member, ex officio;

(h) a Professor in the Indian Institute of Management, being a society registered under the Societies Registration Act, 1860(21 of 1860) or the Indian Institute of Foreign Trade, being a society registered under the Societies Registration Act, 1860, as may be, nominated by the Central Government--Member, ex officio;

(i) an officer not below the rank of Deputy Secretary to the Government of India dealing with the Special Economic Zones in the Ministry or Department of the Central Government, dealing with commerce to be nominated by the Central Government--Member-Secretary, ex officio:

Provided that the member, being the Joint Secretary, nominated under clauses (b) to (d) of this sub-section may, if he is unable to attend the meeting of the Board, authorise any other officer to attend the meeting of the Board on his behalf.

(3) The term of office of an ex officio Member shall come to an end as soon as he ceases to hold the office by virtue of which he was so nominated.

(4) For the purposes of performing its functions, the Board may co-opt as members, such number of persons as it deems fit, who have special knowledge of, and practical experience in, matters relating to, or relevant to activity connected with the Special Economic Zones and any such person shall have the right to take part in the discussions of the Board but shall not be counted for the quorum and shall not be a member for any other purpose and such person shall be entitled to receive such allowances or fees, as the case may be, fixed by the Board.

(5) The Board shall meet at such times and places as may be appointed by it and shall have the power to regulate its own procedure.

(6) One-third of the total Members of the Board shall form a quorum, and all the acts of the Board shall be decided by a general consensus of the Members present.

(7) No act or proceeding of the Board shall be called in question on the ground merely of existence of any vacancy in, or any defect in the constitution of, the Board.

(8) All orders and decisions of the Board and all other instruments issued by it Shall be authenticated by the signature of the Member-Secretary, or any other Member as may be authorised by the Board in this behalf.

Section 9. Duties, powers and functions of Board

(1) Subject to the provisions of this Act, the Board shall have the duty to promote and ensure orderly development of the Special Economic Zones.

(2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Board shall include--

(a) granting of approval or rejecting proposal or modifying such proposals for establishment of the Special Economic Zones;

(b) granting approval of authorised operations to be carried out in the Special Economic Zones by the Developer;

(c) granting of approval to the Developers or Units (other than the Developers or the Units which are exempt from obtaining approval under any law or by the Central Government) for foreign collaborations and foreign direct investments (including investments by a person resident outside India), in the Special Economic Zone for its development, operation and maintenance;

(d) granting of approval or rejecting of proposal for providing infrastructure facilities in a Special Economic Zone or modifying such proposals;

(e) granting, notwithstanding anything contained in the Industries (Development and Regulation) Act, 1951 (65 of 1951), a licence to an industrial undertaking referred to in clause (d) of section 3 of that Act, if such undertaking is established, as a whole or part thereof, or proposed to be established, in a Special Economic Zone;

(f) suspension of the letter of approval granted to a Developer and appointment of an Administrator under sub-section (1) of section 10;

(g) disposing of appeals preferred under sub-section (4) of section 15;

(h) disposing of appeals preferred under sub-section (4) of section 16;

(i) performing such other functions as may be assigned to it by the Central Government.

(3) The Board may, if so required for the purposes of this Act or any other law for the time being in force relating to Special Economic Zones, by notification, decide as to whether a particular activity constitutes manufacture as defined in clause (r) of section 2 and such decision of the Board shall be binding on all Ministries and Departments of the Central Government.

(4) The Board may delegate such powers and functions as it may deem fit to one or more Development Commissioners for effective and proper discharge of the functions of the Board.

(5) Without prejudice to the foregoing provisions of this Act, the Board shall, in exercise of its powers or the performance of its functions under this Act, be bound by such directions on questions of policy as the Central Government may give in writing to it from time to time.

(6) The decision of the Central Government whether a question is one of policy or not shall be final.

Section 10. Suspension of letter of approval and transfer of Special Economic Zone in certain cases

(1) If, at any time, the Board is of the opinion that a Developer--

(a) is unable to discharge the functions or perform the duties imposed on him by or under the provisions of this Act or rules made thereunder; or

(b) has persistently defaulted in complying with any direction given by the Board under this Act; or

(c) has violated the terms and conditions of the letter of approval; or

(d) whose financial position is such that he is unable to fully and efficiently discharge the duties and obligations imposed on him by the letter of approval, and

the circumstances exist which render it necessary for it in public interest so to do, the Board may, on application, or with the consent of the Developer, or otherwise, for reasons to be recorded in writing, suspend the letter of approval, granted to the Developer for a whole or part of his area established as Special Economic Zone, for a period not exceeding one year and appoint an Administrator to discharge the functions of the Developer in accordance with the terms and conditions of the letter of approval and manage the Special Economic Zone accordingly.

(2) Consequent upon appointment of an Administrator, the management of the Special Economic Zone of the Developer referred to in sub-section (1) shall vest in the Administrator.

(3) No letter of approval shall be suspended under sub-section (1) unless the Board has given to the Developer not less than three months' notice, in writing, stating the grounds on which it proposes to suspend the letter of approval, and has considered any cause shown by the Developer within the period of that notice, against the proposed suspension.

(4) The Board may, instead of suspending the letter of approval under sub-section (1), permit it to remain in force subject to such further terms and conditions as it thinks fit to impose, and any further terms or conditions so imposed shall be binding upon and be complied with by the Developer and shall be of like force and effect as if they were contained in the letter of approval.

(5) In case the Board suspends a letter of approval under this section, it shall serve a notice of suspension upon the Developer and fix a date on which the suspension shall take effect.

(6) Upon suspension of the letter of approval under sub-section (1), the Special Economic Zone of the Developer referred to in sub-section (5) shall vest in the Administrator under sub-section (2) for a period not exceeding one year or up to the date on which the letter of approval for such Special Economic Zone is transferred, whichever is earlier, in accordance with the provisions contained in sub-sections (7) and (9), as the case may be.

(7) Where the Board has given notice for suspension of letter of approval under sub-section (5), the Developer may, after prior approval of the Board, transfer his letter of approval to any person who is found eligible by the Board for grant of such approval.

(8) If at any time, it appears to the Board that the purpose of the order appointing the Administrator has been fulfilled or that for any reason it is undesirable that the order of appointment should remain in force, the Board may cancel the order and thereupon the Administrator shall be divested of the management of the Special Economic Zone which shall, unless otherwise directed by the Board, again vest in the person, being the Developer, in whom it was vested immediately prior to the date of appointment of the Administrator.

(9) Where the Board suspends the letter of approval, under this section, in respect of any Developer, the following provisions shall apply, namely:--

(a) the Board shall invite applications for transferring the letter of approval of the Developer, whose approval has been suspended and select the person or persons, in accordance with the procedure as may be prescribed, to whom the letter of approval of the Developer in the Special Economic Zone may be transferred;

(b) upon selection of person or persons under sub-clause (a), the Board may, by notice in writing, require the Developer to transfer his letter of approval in a Special Economic Zone to the person or persons so selected and thereupon the Developer shall transfer his interests, rights and liabilities in the Special Economic Zone to any of the persons (hereafter in this section referred to as the "transferee") who has been selected by the Board on such terms and conditions and consideration as may be agreed upon between the Developer and the transferee;

(c) all the rights, duties, obligations and liabilities of the Developer, on and from the date of suspension of letter of approval or on and from the date, if earlier, on which his letter of approval in the Special Economic Zone of the Developer has been transferred to the transferee, shall cease absolutely except for any liabilities which have accrued prior to that date;

(d) the Board may make such interim arrangements in regard to the operation of the Special Economic Zone as may be considered appropriate;

(e) the Administrator shall exercise such powers and discharge such functions as the Board may direct.

(10) The Board may, in order to promote export or to protect the interest of Units or in the public interest, issue such directions or formulate such scheme as it may consider necessary for operation of the Special Economic Zone.

Chapter IV