- 1. SPECIAL ECONOMIC ZONES- FISCAL BENEFITSRajkumar S. Adukia
09323061049/093221 [email protected][email_address]
http://www.carajkumarradukia.com
2. Agenda
- Special Fiscal Provisions relating to SEZ
- Bond cum Legal Undertaking
3. Fiscal Benefits available to SEZ CenvatCustoms VATIncome
TaxService TaxCentral Sales taxSecurities Transaction TaxExemptions
of tax ,duties or cess in21 Acts Stamp Duty 4. Fiscal Provisions
for SEZ
- Chapter VI ofSpecial Economic ZonesAct ,2005(Section 26 to
Section 30) relates to Special Fiscal Provisions for SEZ
- Chapter IV of Special Economic Zones Rules, 2006 (Rule 22 to
Rule 46) relates to Terms and conditions subject to which
entrepreneur and developer shall be entitled to exemptions,
drawbacks and concessions
- Chapter V of Special Economic Zones Rules, 2006 (Rule 47 to
Rule 52) relates to conditions subject to which goods may removed
from Special Economic Zones to DTA
5. Exemption available to Sub contractor also Rule 10
- Exemptions, drawbacks and concessions on the goods and services
allowed to a Developer or Co-developer will also be available to
the contractors appointed by such Developer or Co-developer
- All the documentsin such cases shouldbear the name of the
Developer or Co-developer along with the contractor
- Documents shouldbe filed jointly in the name of the Developer
or Co-developer and the contractor:
6. Exemption from taxes,duties or cess- Sec 7
- Sec 7 of The Special Economic Zones Act,2005 -
- 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
- 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.
7. First Schedule to The Special Economic Zones Act, 2005
- 1.The Agricultural Produce Cess Act, 1940
- 3.The Mica Mines Labour Welfare Fund Act, 1946
- 6.The Salt Cess Act, 1953 .
- 7.The Medicinal and Toilet Preparations (Excise Duties) Act,
1955 .
8. First Schedule to Special Economic Zones Act, 2005
- 8.The Additional Duties of Excise (Goods of SpecialImportance)
Act, 1957
- 9.The Sugar (Regulation of Production) Act, 1961
- 10.The Textiles Committee Act, 1963
- 11.The Produce Cess Act, 1966
- 12.The Marine Products Export Development Authority Act,
1972
- 13.The Coal Mines (Conservation and DevelopmentAct, 1974 .
- 14.The Oil Industry (Development) Act, 1974 .
9. First Schedule to Special Economic Zones Act, 2005
- 15. The Tobacco Cess Act, 1975
- 16.The Additional Duties of Excise (Textile and
TextileArticles) Act, 1978
- 17.The Sugar Cess Act, 1982
- 18.The Jute Manufactures Cess Act, 1983
- 19.The Agricultural and Processed Food ProductsExport CessAct,
1985
- 20.The Spices Cess Act, 1986
- 21.The Research and Development Cess Act, 1986
10. 1.The Agricultural Produce Cess Act, 1940
- Act to make better financial provision for the Indian Council
of Agricultural Research
- It impose on certain articles a cess by way of customs duty at
the rate of .5% on export, the proceeds of which shall be paid to
the Council.(Sec 3)
- It imposes cess on 21 items which are as under
Bones,bristles,butter,cereals other than rice and wheat,drugs,fibre
for brushes, fish, fruits, ghee, hides,
manures,oilcakes,pulses,seeds,skins,spices,tobacco,
vegetables,wheat,wheat flour,wool,
11. 2.The Coffee Act, 1942
- A duty of excise is levied at rate not exceeding Rs 6 per 100
weight as may be fixed by the Central Government on all coffee
- A duty of customs is levied on all code produced in India and
exported from India at rate not exceeding Rs 6 per 100weight as may
be fixed by the Central Government (sec 11)
- The proceeds of the duty of customs and of the duty of excise
reduced by the cost of collection ispaid to the theIndian Coffee
Market Expansion Board (Sec 13)
12. 3. The Mica Mines Labour Welfare Fund Act, 1946
- An Act to constitute a fund for the financing of activities to
promote the welfare of labour employed in the mica mining
industry.
- A duty of customs is leviedon all mica exported at such rate,
not exceeding 6.25 % ad valorem, as may from time to time be fixed
by the Central Government (Sec 2)
- Proceeds of the duty of customs recovered ispaid to the credit
of Mica Mines Labour Welfare Fund (Sec 2)
- Fund utilise the moneyto promote the welfare of labour employed
in the mica mining industry
13. 4. The Rubber Act, 1947
- Act for the development of the rubber industry
- A duty of excise is levied on all rubber produced in lndia at
such rate not exceeding Rs 2 per kg of rubber as the Central
Government may fix.(Section 12(1)
- The proceeds of the duty of excise collected under this section
reduced by the cost of collection is first credited to the
Consolidated Fund of lndia
- Amount collected Paid by the Central Government to the Rubber
Board for being utilised for the purpose of this Act (Section
12(7)
14. 5. The Tea Act, 1953 .
- An Act to Provide for the control by the Union of the tea
industry, including the control, in pursuance of the International
Agreement now in force, of the cultivation of tea in, and of the
export of tea from, India and for that purpose to establish a Tea
Board and levy a customs duty on tea exported from India.
- Customs duty- on tea exported or taken outside India at such
rate not exceeding Rs 2 per 100 pounds as the Central Government
may notify in the Official Gazette (Sec 25)
- The proceeds of the cess levied under is firstcredited to the
Consolidated Fund of India and the Central Government may pay to
the Tea Board (Sec 26)
15. 6. The Salt Cess Act, 1953 .
- A cess in the nature of excise duty is levied on all salt
manufactured
- in the case of salt manufactured in a private salt factory, at
the rate of two annas per standard maund
- in the case of salt manufactured in a salt factory solely owned
or solely worked by the Central Government at the rate of three and
a half annas per standard maund (Section 3)
- It is used to meet the expenses incurred on the salt
organisation maintained by Government and on the measures taken by
Government in connection with the manufacture, supply and
distribution of salt.
16. 7.The Medicinal and Toilet Preparations (Excise Duties)Act,
1955
- An Act for the levy and collection of duties of excise on
medicinal and toilet preparations containingalcohol, opium, Indian
hemp or other narcotic drug or narcotic.
- Toilet preparation means any preparation which is intended for
use in the toilet of the human body or in perfuming apparel of any
description, or any substance intended to cleanse, improve or alter
the complexion, skin, hair or teeth, and includes deodorants and
perfumes (Section 2(k))
17. 7. The Medicinal and Toilet Preparations (Excise Duties)
Act, 1955Schedule contd.. Rate of duty Description of dutiable
goods Rupees five per gallon of the strength of London proof
spirit. All other Medicinal and toilet reparations not otherwise
specified containing alcohol Rupees three per gallon Ayurvedic
preparations containing self generated Alcohol, which are capable
of being consumed as ordinary alcoholic beverages. Rupees seventeen
and ann as eight per gallon of the strength of London proof Spirit.
Medicinal and toilet reparations, containing alcohol, 18. 8. The
Additional Duties of Excise (Goods of Special Importance) Act,
1957
- A duty of excise at the rate or rates specified in the First
Schedule to this Act in respect of the following goods,namely,
sugar, tobacco, cotton fabrics, rayon or artificial silk fabrics
and woolen fabrics produced or manufactured in India
- The duties of excise shall be in addition to the duties of
excise chargeable on such goods under the Central Excises and Salt
Act, 1944(Section 3)
19. 9. The Sugar (Regulationof Production) Act, 1961
- Where the quantity of sugar produced in a factory during any
year exceeds the permissible quota fixed for it for that year
- there shall be levied and collected on the quantity of sugar
which is produced in excess of the permissible quota
- a special duty of excise at the rate at which the duty of
excise is chargeable on sugar under the Central Excises Act
- The special duty of excise shall be in addition to the duty of
excise chargeable on sugar under the Central Excises Ac
20. 10. The Textiles CommitteeAct, 1963
- An Act to provide for the establishment of a Committee for
ensuring the quality of textiles and textile machinery and for
matters connected therewith.
- The Committee may levy such fees as may be
- prescribed-- (a) For inspection and examination of textiles,
(b) For inspection and examination of textile machinery, (c) for
any other service which the Committee may render to the
manufacturers of textiles and textile machinery(Section 12)
21. 11.The Produce Cess Act, 1966
- An Act that provides for the imposition of cess on certain
produce for the improvement and development of the methods of
cultivation and marketing of such produce and for matters connected
therewith
- A cess is levied for the purposes of this Act on every produce
specified First Schedule, which is exported from any customs port
to any port beyond the limits of India, a duty of customs at such
rate, not exceeding the rate specified in the First Schedule
- A cess is leviedfor the purposes of this Act, on every produce
specified in the Second Schedule, a duty of excise at such rate,
not exceeding the rate specified in Second Schedule (Section
3)
22. 12. The Marine Products Export Development Authority Act,
1972
- An Act to provide for the establishment of an Authority for the
development of the marine products industry
- A cessislevied on all marine products which are exported at
rate not exceeding 3% as the Central Government decide (Sec
14(1))
- The cess levied shall be in addition to any access or duty
leviable on marine products under any other law for the time being
in force. (Sec 14(2))
- The proceeds of the cess is first credited to the Consolidated
Fund of India and the Central Governmentpay to the Marine Products
Export Development Authority from out of such proceeds, after
deducting the expenses (Sec 15)
23.
- The Coal Mines(Conservation andDevelopment Act, 1974
- An Act to provide for the conservation of coal and development
of coal mines and for matters connected therewith or incidental
thereto.
- Excise Duty - on all coal raised and despatched, and on all
coke manufactured and despatched, from the collieries in India at
the rate not exceeding Rs 10 per tonne (sec 6)
- Custom duty - on all coal (including soft and hard coke),
imported or brought into India from any place outside India, a duty
of customs at the rates equivalent to the rates of duty of excise
(sec 7)
- Amount collected shall be disbursed by the Central Government
to the owners, agents or managers of coal mines (Sec 9)
24.
- The Oil Industry(Development) Act, 1974 .
- An Act to provide for the establishment of a Board for the
development of oil industry and for that purpose to levy a duty of
excise on crude oil and natural gas and for matters connected
therewith.
- Excise duty- on every item specified in column 2 of the
Schedule at such rate not exceeding the rate set forth in the
corresponding entry in column 3 of the Schedule (Sec 15)
- The proceeds of the duties of excise levied under shall first
be credited to the Consolidated Fund of India and the Central
Government pay to the Oil Industry Development Fund (sec 16)
25.
- The TobaccoCess Act, 1975
- An Act to provide for the Levy and collection, by way of cess,
of a duty of excise on virginia tobacco and a duty of customs on
tobacco, for the development of tobacco industry
- Excise duty-at the rate of 1 paisa per kg on virginia tobacco
which is produced in India and sold at a registered auction
platform. (Sec 3)
- customs duty -at rate not exceeding 1% ad valorem, as the
Central Government may specify on all tobacco which is
exported.(Sec 4)
- The proceeds shall first be credited to the Consolidated Fund
of India and the Central Government may pay to the Board, for
utilised for the purposes of the Tobacco Board Act, 1975 (Sec
5)
26. 16.The Additional Dutiesof Excise (Textile and Textile
Articles) Act, 1978
- An Act to provide for the levy and collection of additional
duties of excise on certain textiles and textile articles
- Excise duty-Goods of the description mentioned in the
Scheduleare chargeable to dutyequal to 10% of the total amount
chargeable on such goods. (Sec 3)
- Items in schedule are Man-made fibres , Cotton yarn , Woolen
and acrylic spun yarn, Non-cellulosic spun yarn,Cotton fabrics,
Silk fabrics, Woolen fabrics, Man-made fabrics, Wool tops.
27. 17. The Sugar Cess Act, 1982
- An Act to provide for the imposition of a cess on sugar for the
development of sugar industry and for matters connected
therewith
- A cess is leviedfor the purposes of the Sugar Development Fund
Act, 1982, a duty of excise on all sugar produced any sugar factory
in India, at such rate not exceeding Rs 15per quintal of sugar (Sec
3)
- The proceeds of the duty of excise levied under section 3 shall
be credited to the Consolidated Fund of India
28. 18. The Jute ManufacturesCess Act, 1983
- An Act to provide for the levy and collection, by way of cess,
of a duty of excise on jute manufactures for the purpose of
carrying out measures for the development of production of jute
manufactures
- Cessis levied on every article of jute manufacture specified in
column 2 of the Schedule and produced in India by a duty of excise
at such rate not exceeding the rate specified in the corresponding
entry in column 3 thereof (Sec 3)
- The proceeds of the duty of excise levied shall first be
credited to the Consolidated Fund of India and the Central
Government may pay to the Jute Manufactures Development Council for
the purposes of the Jute Manufactures Development Council Act,
1983(Sec 4)
29. 19. The Agricultural andProcessed Food ProductsExport Cess
Act, 1985
- An Act to provide for the levy and collection, by way of a
cess, of a duty of customs on the export of certain agricultural
and processed food products for the development and promotion of
their export
- Custom duty- at a rate not exceeding 3% by way of a cess on all
Scheduled products, which are exported. (Sec 3)
- The proceeds of the duties of customs levied shall first be
credited to the consolidated Fund of India and the Central
Government may pay to the Agricultural and Processed Food Products
Export Development Authority (Sec 4)
30. 20. The SpicesCess Act, 1986
- An Act to provide for imposition of cess on all spices which
are exported for the purposes of carrying out measures for the
development of export of spices.
- customs duy-on spices at such rate not exceeding 5% , ad
valorem (Sec 3)
- proceeds of the duty of customs levied credited to the
consolidated Fund of India and the Central Government maypay for
the purposes of the Spices Board Act, 1986(Sec 3)
31. 21. The Research andDevelopmentCess Act, 1986
- An Act to provide for the levy and collection of a cess on all
payments made for the import of technology for the purposes of
encouraging the commercial application of indigenously developed
technology and for adapting imported technology to wider domestic
application
- a cess is levied at such rate not exceeding five per cent, on
all payments made towards the import of technology (Sec 3)
- The proceeds of the cess levied and collected shall first be
credited to the Consolidated Fund of India and the Central
Government may pay to the Technology Development Board constituted
under the Technology Development Board Act, 1995 for the purposes
of the Board (Sec 4)
32. Terms and conditions for availing exemptions, drawbacks and
concessions (Rule 22(1) )
- (i) The Unit shall execute a Bond-cum-Legal Undertaking in Form
H, with regard to its obligations regarding proper utilization and
accountal of goods and regarding achievement of positive net
foreign exchange earning;
- (ii)The Developer and Co-Developer shall execute the
Bond-cum-Legal Undertaking in Form D with regard to their
obligations regarding proper utilization andaccountal of goods
- (iii)The Bond-cum-Legal Undertaking shall be jointly acceptedby
Development Commissioner and by the SpecifiedOfficer:
33. Activities covered in Bond-cum-Legal Undertaking(Rule
22(1)(iii) )
- the movement of goods between port of import or export and the
Special Economic Zone;
- the authorized operations, as applicable to Unit or
Developer;
- temporary removal of goods or goodsmanufactured in Unit for the
purposes of repairs or testing or calibration or display or
processingor sub-contracting of production process or production or
other temporary removals into Domestic Tariff Area without payment
of duty
- re-import of exported goods.
34. Responsibility for Execution of Bondcum-Legal
Undertaking(Rule 22(1)(iv)) proprietorship concern Hindu Undivided
Family partnership firm companyStatus ofentrepreneur or Developer
proprietor Karta all the partners or authorized partner(s);
Managing Director of the company or any other authorized person
Responsibility 35. Value ofBond-cum-Legal UndertakingRule
22(1)(iv))
- Equal to the amount of effective duties leviable on import or
procurement from the Domestic Tariff Area of the projected
requirement of capital goods, raw materials, spares, consumables,
intermediates, components, parts, packing materials for three
months
- The Bond-cum-Legal Undertaking
- amount shall be monitored quarterly
- or yearly on the basis of Quarterly
- Progress Report or Annual Progress Report
36. An Exception- Rule 27(3)
- Any goods for the personal use of or consumption by
officials,workmen, staff, owners or any other person in relation to
a Unit or Developer, shall not be eligible for exemptions,
drawbacks and concessions or any other benefit
37. Income Tax Benefits 38. Relevant Sections inIncome Tax
Act,1961 Non applicability of MAT to SEZ 115JB(6) 6 Deduction from
income of OBU and IFSC 80LA 5 Deduction is respect of profits and
gains in development of SEZ80-IAB 4 Exemption of Capital gain on
transfer of asset in case of shifting of Industrial Undertaking
from Urban Area to SEZ 54GA 3 Exemption to newly established Units
in SEZ 10AA 2 Interest received on deposit with Offshore Banking
Unit is exempt10(15)(viii) 1 DescriptionSectionS.No 39. Relevant
Sections in Income Tax Act,1961 Changes in the Income Tax Act 1961
relating to SEZ made bySpecial Economic Zones Act 2005 w.e.f
10/02/2006 No TDS on interest on deposits made with OBU by
Non-resident or person not ordinary resident in India197A 8
Exemption from dividend distribution tax in respect of income of
SEZ 115-O 7 DescriptionSectionS.No 40.
- Exemption to newly established
41.
- Exemption to Unit who begins to manufacture or produce articles
or things or provide any services during the PY relevant to any AY
commencing on or after 01.04.2006
- 100% of Profits from export
- 50% of Profits from exports
- for further 5 assessment years
- 50% of Profits for as credited to Special Economic Zone
Re-investment Reserve Account for next 5years
- Absence of restrictive proviso in new Sec. 10AA dealing with
Reconstruction, reconstitution of business in existence
42. Use of Special Economic Zone Re-investment Reserve Account(
S 10AA(2(a))
- Acquiring machinery or plant
- Until the acquisition of the machinery or plant for the
purposes of the business of the undertakingother than
- for distribution by way of dividends or profits or
- for remittance outside India as profits or
- for the creation of any asset outside India;
43. Mis-use of Special Reserve Account ( S 10AA(3))
- If the Special Reserve Account is misutilised, then the
deduction would be taken back in the year in which the Special
Reserve Account is misutilised.
- If the Special Reserve Account is not utilised for acquiring
new plant and machinery within three years as stated above then the
deduction would be taken back in the year immediately following the
period of three years.
44. Consequences for merger and demerger( S 10AA(5))
- Where an undertaking is transferred to another company under a
scheme of amalgamation or demerger, the deduction under section
10AA shall be allowable in the hands of the amalgamated or the
resulting company.
- However, no deduction shall be admissible under this section to
the amalgamating company or the demerged company for the previous
year in which amalgamation or demerger takes place.
45.
- Exemption of Capital Gain
46.
- Exemption of capital gains on transfer of assets in cases of
shifting of industrial undertaking from urban area to any Special
Economic Zone.
- The exemption is availableto all categories of assesses on
capital gain arising on the transfer of certain capital asset of
industrial undertaking from urban area to SEZ. (whether developed
in an urban area or not)
- The Asset transferred should be machinery or plant or building
or land or any rights in building or land
- The capital gain should be utilized within one year before or
three years after the date of transfer for the specified
purpose.
47. Specified Purpose- 54GAcontd..
- ( i)purchased machinery or plant
- (ii) acquired building or land or constructed building
- (iii)shifted the original asset and transferred the
establishment of such undertaking to the Special Economic Zone;
and
- (iv) incurred expenses on such other purposes as may be
specified in a scheme framed by the Central Government for the
purposes of this section.
- The amount of capital gain which is not so utilised for the
specific purposes should be deposited in an account with any
specified bank or institution and utilised in accordance with the
scheme notified by the Central Government
48. Quantum Of Deduction -Sec 54GAcontd.. Exemption: to the
extent of cost and expenses incurred Amount of Capital Gain >
Cost and expenses incurredfor specified Purposes. Entire Capital
Gain exempt Amount of Capital Gain