SEZ Rules Amended

SEZ (Amendment) Rules, 2013 notified to give effect to the reform announcements made in the Foreign Trade Policy

To implement the reform announcements made in the Annual Supplement (2013-14) to the Foreign Trade Policy 2009-14 earlier this year, the Ministry of Commerce notified the Special Economic Zone (Amendment) Rules, 2006 on August 12, 2013. The amendments are summarized below.

1. Relaxation of area requirements

· The most significant change is the doing away with the present requirement of 10 hectares of minimum land area for IT / ITeS SEZs and replacing it with a minimum built up area criteria depending on the location of the SEZ, as summarized below.

Location of SEZ	Earlier minimum area requirement	Minimum area requirement after amendment
Category A cities (Major cities namely Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangalore, Pune and Kolkata)	10 hectares of land area and 100,000 square meters of built up area	100,000 square meters with no requirement of minimum land area
Category B cities (Ahmedabad, Bhubneshwar, Chandigarh, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Madurai, Mangalore, Nagpur, Thiruvananthapuram, Tiruchirappali, Vadodara and Visakhapatnam)		50,000 square meters with no requirement of minimum land area
Category C cities (All other cities)		25,000 square meters with no requirement of minimum land area

The above relaxation is however not applicable to the wider sector SEZs for Electronics hardware and Software (including ITeS).

· The minimum land area requirement for multi-product SEZs has been halved from 1000 hectares to 500 hectares, and similarly for sector-specific SEZs from 100 hectares to 50 hectares (and from 200 hectares to 100 hectares for select states^[1]).

· A graded scaling provision has been introduced by virtue of which developers can create additional sector/s for a land tract of 50 acres or more in existing SEZs and for incremental contiguous land tracts of 50 hectares where land additions are proposed to the SEZ.

2. Sectoral broad banding

· Sectoral broad-banding to encompass compatible sectors under the same sector category has been enabled by amending the definition of “Sector” in the amended SEZ Rules.

· In this regard, the Rules, inter alia, provide that, all ancillary services and research and development services of a particular sector and additional combination of products and services of a similar or compatible nature shall constitute a single sector.

3. Duty benefits on pre-existing structures on vacant land forming part of the SEZ

· Land with structures on which no economic activity is being carried on can now be added to an existing SEZ. Further, any developments or up-gradation to the pre-existing structures which has been subsequently added / included in the SEZ would be eligible for duty benefits similar to any other activity in the SEZ.

· Further, the authorized operations carried on in such added / included infrastructure will also be eligible for duty benefits similar to any other activity.

4. Exit policy for units

· A SEZ Unit is now allowed to opt out of a SEZ by transferring its assets and liabilities to another person by way of transfer of ownership, including sale of such units, along with the duty obligations, subject to certain conditions.

· The conditions inter alia, stipulate that the Unit should be operational for a minimum period of two years. However, the provisions do not cover situations wherein the units which have not been able to commence operation wish to opt out of a SEZ.