Rule 18 - Consideration of proposals for setting up of Unit in a Special Economic Zone - Special Economic Zones Rules, 2006

18. Consideration of proposals for setting up of Unit in a Special Economic Zone . - (1) The Approval Committee may approve or approve with modification or reject a proposal placed before it under sub-rule (2) of rule 17, within fifteen days of its receipt: Provided that where the approval is to be granted by the Board in terms of sub-rule (3) of rule 17, the Board shall approve or approve with modification or reject such proposal within forty-five days of its receipt: Provided further that the Approval Committee or the Board, as the case may be, shall record the reasons, in writing, where it approves a proposal with modifications or where it rejects a proposal and Development Commissioner by order shall communicate such reasons to the person making the proposal. (2) The Approval Committee shall approve the proposal if it fulfills the following requirements, namely: - 7 [ (i) the proposal meets with the positive net foreign exchange earning requirement. In addition, prescribed value addition earning requirement, as the case may be, shall apply. ] (ii) availability of space and other infrastructure support applied for, is confirmed by the Developer in writing, by way of a provisional offer of space; Provided that the Developer shall enter into a lease agreement and give possession of the space in the Special Economic Zone to the entrepreneur only after the issuance of Letter of Approval by the Development Commissioner: 2 [Provided further that a copy of the registered Lease Deed shall be furnished to the Development Commissioner concerned within six months from the issuance of the Letter of Approval and failure to do so, the Approval Committee may take action to withdraw the Letter of Approval after giving an opportunity of being heard;] (iii) the applicant undertakes to fulfill the environmental and pollution control norms, as may be applicable; (iv) the applicant submits proof of residence, namely, passport or ration card or driving licence or voter identity card or any other proof of the proprietor or the partners of partnership firms or Directors of the Company, as the case may be, to the satisfaction of Development Commissioner; (v) the applicant submits the Income tax returns, along with annexures, of the Proprietor or Partners, or in the case of a company, audited balance sheet for the last three years. (3) the proposal shall also fulfill the following sector specific requirements, namely:- 4 [ (a) export of the goods from Special Economic Zones shall be subject to export policy in force, as provided in Schedule 2 to the Indian Trade Classification (Harmonised System) of Export and Import Items, 2017; ] 5 [ (b) for Gems and Jewellery, the minimum Value Addition earning requirement shall be as specified in the prevailing Foreign Trade Policy or Handbook of Procedures, as amended from time to time. ] Provided that this restriction shall not apply to the Units which intend to send the fabric, made by them out of polyester or texturised yarn, for subcontracting but the third party exports shall not be permitted; (4) No proposal shall be considered for:- (a) recycling of plastic scrap or waste: Provided that extension of Letter of Approval for an existing Unit shall be decided by the Board; (b) enhancement of the approved import quantum of plastic waste and scrap beyond the average annual import quantum of the unit since its commencement of operation to the existing Units; (c) reprocessing of garments or used clothing or secondary textiles materials and other recyclable textile materials into clipping or rags or industrial wipers or shoddy wool or yarn or blankets or shawls: Provided that extension of Letter of Approval for an existing Unit shall be decided by the Board; (d) import of other used goods for recycling: Provided that extension of Letter of Approval for an existing Unit shall be decided by the Board; 8 [ Provided further that reconditioning, repair and re-engineering may be permitted subject to the conditions that export shall have one to one correlation with imports and all the reconditioned or repaired or re-engineered products shall be exported: Provided also that only non-hazardous metal and metal-alloy wastes in metallic, non-dispersible form having no contaminants enlisted against Basel No. B1010 in Part D of Schedule III of the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 generated from the reconditioning, repair or reengineering, may be allowed to be sold in the Domestic Tariff Area on payment of applicable customs duty and this shall be treated as import and will be permitted only to the actual user or to the trader for use of the actual users authorized by the State Pollution Control Board on one-time basis and subject to verification of documents specified in Schedule VIII of the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 by the Custom Authority ] (e) Export of Special Chemicals, Organisms, Materials, Equipment and Technologies unless it fulfils the conditions indicated in the Import Trade Control (Harmonized System) Classifications of export and import items; (f) if there is any instance of violation of law or public policy by the promoters, having a bearing on the merits of the proposal. 1 [(g) Omitted] 6 [ (4A) for existing plastic or used clothing Units in Special Economic Zones:- (a) Broad banding and splitting of license for setting up of sub-Units shall not be allowed and all transactions of a Unit shall be regulated through a single bank account; (b) no third party exports shall be allowed by any such Unit; (c) all such Units shall set up facilities to make products out of used clothing or plastic waste; (d) 100 per cent. inspection of the consignment of used clothing sale to Domestic Tariff Area shall be under taken. (4B) Procedure to be followed for verification of documents prior to clearing the consignment in Special Economic Zone :- (a) Each consignment of used clothing imported by the Unit shall be accompanied with certificate from exporter or agency in which it was generated regarding dis-infection and fumigation of the containers from an agency licensed in the country of origin of worn clothing along with import documents; (b) in case of mis-declaration by any importer in regard to any toxic or hazardous substances, action as per the relevant provisions of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) shall be taken against such importer; (c) to ensure that used clothing re-processing Units in Special Economic Zones fulfil their export obligations in addition to meeting their Net Foreign Exchange obligation and all such Units shall be required to ensure that certain minimum percentage of the Units annual turnover is physically exported out of the country; (d) before the clearance of used clothes to Domestic Tariff Area, all imported consignments of such used clothes shall be subject to 100 per cent. scrutiny at the premises of the Unit by Special Economic Zone authorities. ] (5) The Units in Free Trade and Warehousing Zones or units in Free Trade and Warehousing Zone set up in other Special Economic Zone, shall be allowed to hold the goods on account of the foreign supplier for dispatches as per the owner s instructions and shall be allowed for trading with or without labeling, packing or repacking without any processing: Provided that refrigeration for the purpose of storage and assembly of Completely Knocked Down or Semi Knocked Down kits shall also be allowed by the Free Trade and Warehousing units undertaking the said activities: Provided further that these Units may also re-sell or re-invoice or re-export the goods imported by them: Provided also that all transactions by a Unit in Free Trade and Warehousing Zone shall only be in convertible foreign currency; (6) Units may also be setup for providing services or manufacturing services to Overseas Entities subject to following conditions, namely:- (a) Capital goods, raw materials including consumables sub-assemblies, components, semi-finished goods shall be supplied by the Overseas Entity free of cost; (b) Capital goods for setting up such facilities may also be supplied on loan or lease basis, provided the notional value of such capital goods shall be taken into account for calculation of Net Foreign Exchange Earnings under rule 53. (c) finished goods shall be exported out of the country or transferred to the Customs Bonded Warehouse to be maintained by the Overseas entity; Provided that any supplies of finished goods shall be as per the instructions of the Overseas entity. (d) the Unit shall receive the consideration for its manufacturing services in convertible foreign exchange directly from the said overseas entity; (e) in case the said manufacturing facility is used by the Unit for carrying out production on its own account, separate accounts shall be maintained for the manufacturing and service activity. Explanation: - Overseas Entity means a non-resident or a person of foreign origin and includes a company not incorporated in India. ************** Notes: 1. Clause (g) of Sub-rule (4) Has been omitted vide Notification No G.S.R. 1744(E), DATED 12-10-2007 before Omission it was read as , the use of any plant or machinery previously used for any purpose in Domestic Tariff Area. [Clause (g) has been inserted with effect from 10-8-2006 vide notification no. 470(E)] 2. Second proviso in sub-rule (2) has been substituted vide notification no. G.S.R.72 (E).- dated 3-2-2009 , earlier it was read as: Provided further that a copy of the registered lease deed shall be furnished to the Development Commissioner concerned within six months from the issuance of the Letter of Approval; 3. Substituted vide Notification No. G.S.R. 909(E) dated 19-09-2018 before it was read as as provided in rule 53 4. Substituted vide Notification No. G.S.R. 909(E) dated 19-09-2018 before it was read as (a) export of high-grade iron ore, that is sixty-four per cent. Fe and above, except iron ore of Goa origin and Redi origin, which would be subject to approval of Board; 5. Substituted vide Notification No. G.S.R. 909(E) dated 19-09-2018 before it was read as (b) no sub-contracting or job work of polyester yarn shall be permitted in Domestic Tariff Area or in Export Oriented Unit or Units in other Special Economic Zone: 6. Inserted vide Notification No. G.S.R. 909(E) dated 19-09-2018 7. Substituted vide NOTIFICATION No. G.S.R. 200(E) dated 07-03-2019 before it was read as (i) the proposal meets with the positive net foreign exchange earning requirement, 3 [ value addition earning requirement, as the case may be, as provided in rule 53 ] ; 8. Substituted vide NOTIFICATION NO. G.S.R. 338(E) dated 20-06-2024 before it was read as, Provided further that reconditioning, repair and reengineering may be permitted subject to the condition that exports shall have one to one correlation with imports and all the reconditioned or repaired or re-engineered products and scrap or remnants or waste shall be exported and none of these goods shall be allowed to be sold in the Domestic Tariff Area or destroyed;