4. Procedures for Setting up a Unit in SEZ
Approach SEZ
developer
Discussion /Briefing session
Details of
the form to
be
examined
by the
developer
Furnishing the application form
to allot Space in SEZ Unit
Obtaining the Willingness Letter
from developer to allocate space
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5. After obtaining willingness letter from SEZ developer/ Codeveloper for allocating space
Time - Working days
Online registration with SEZ Development Commissioner
Submission of Proposal* to the Development Commissioner
with Five Copies of Form F along with required documents
7- 15 days based
on availability of
information
Development Commissioner to scrutinize the proposal and
call for a meeting
Proposal Approved or rejected by Approval Committee
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15 – 45 days of
receiving
proposal
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6. If proposal Approved
Letter of Approval (LOA) issued by Development
Commissioner** in Form G
15 days of meeting
Total ~ 60 days
Send acceptance letter along with Bond cum Legal
Undertaking to development commissioner
7 days of obtaining
LOA
Lease Agreement between the developer & Entrepreneur
(Form H) has to registered with sub registrar
6 months time allowed
Furnish copy of Registered Lease to the DC
** Development commissioner sits in Kochi
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7. Evaluation
For shifting or opening a new unit in SEZ,
things to be considered:
The Company has to make a thorough analysis of cost involved in setting up of new
unit and forecasted revenues.
If new unit setup involved procurement of Capital Goods in high number then SEZ or
STPI option is preferable since cost will be low as no duty payable thereon.
If the intention is to save income tax on high margin contracts, the only option
preferred is SEZ.
If the company intends to reduce statutory procedures, then a regular unit (NonSEZ/Non –STPI) is preferable however no tax concessions shall be available.
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8. Capital gains tax incidence on disposal of STP unit
Slump Sale
Normal Sale
In Case of transfer agreement
Whole of unit is sold/ transferred. Individual
value not known
In Case of transfer agreement
Individual value of assets to be considered
Valuation of Assets:
In case of depreciable assetsWDV of the assets
Others book value of the assets
Valuation of Assets:
Revalued amount of assets
No Indexation benefit will be available
Indexation benefit will be available only on land
LTCG if unit was held for more than 36
months irrespective of individual assets
LTCG or STCG is computed for individual assets
Note :
• For Sec 50 C computation is applicable to Land & Building
• 54EC and 54F exemption is available on LTCG
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9. Comparison between schemes: Benefits
Benefits
Normal scheme
STPI
SEZ
Eligible entity
Any
Having export and
local sales (allowed
50% of exports
Mainly into exports
Income Tax
exemption
No
No
Yes (15 years tax holiday,
But MAT @ 18.5%
applicable
Service Tax input
exemption
No. If export business then
can obtain refund. But will
take 3 years. So cash is stuck
Yes. However refund
of tax will take 3
years, so cash is stuck
Exempted. So cash is
freely available
Central sales tax
exempted: inputs
No
No, reimbursement
available
Yes
Customs duty
exempted: inputs
No
Yes
Yes
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10. Comparison between schemes: Benefits
Benefits
Normal scheme
STPI
SEZ
FDI investment
Restriction applicable
100% FDI allowed
100% FDI allowed
Single window
clearance from all
govt departments
No
Yes
Yes
Free External
commercial
borrowings
No
No
Yes upto $500 mn
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11. Comparison between schemes: Obligations
Obligations
Normal scheme
STPI
SEZ
Achieve positive Net Foreign exchange
earning
Not applicable
Yes
Yes
Separate books of accounts to be
maintained
Not required
Yes
Yes
Periodical reports submission
Not required
Yes. To
STPI
Yes. To SEZ
department
Execute bonds as guarantee against
duty benefits
Not required
Yes
Yes
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12. Major Indirect Benefits of Business Structuring for SEZ
External commercial borrowing to USD 500 million in a year without any maturity
restriction through recognized banking channels
100% FDI/NRI investment allowed under automatic route
100% retention of export proceeds in Foreign Currency account
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13. Amount in INR
Exhibit 1:
Particulars
Normal
scheme
Under STPI
Scheme
a) Sales
100 Lakhs
100 Lakhs
100 Lakhs
b) Profit @ 20 % of sales
20 Lakhs
20 Lakhs
20 Lakhs
b) Income Tax rate
32.445%
32.445%
20%
c) Income Tax Payable
6.5 Lakhs
6.5 Lakhs
4 Lakhs
e) Input services (assuming
30% of sales)
30 Lakhs
30 Lakhs
30 Lakhs
f) Input Service Tax @
12.36% of e
3. 71
Lakhs
3. 71 Lakhs
NIL as Service
Tax is exempt
2.00 Lakhs
NIL
g) Interest on delayed refund
of ST @ 18% of
as there is 3 years delay in
obtaining refund
Total savings per annum
Under SEZ
scheme
Savings from
SEZ vis-a-vis
normal
scheme
2.5 Lakhs
Savings from
SEZ vis-avis
STPI
2.5 Lakhs
3.71 Lakhs
2.00 Lakhs
6.21 Lakhs
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4.50 Lakhs
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14. Amount in INR
Exhibit 1: contd.
Particulars
2013-14
2014-15
a) Savings in Tax assuming
20% increase in sales every
year
4.50 Lakhs 5.40 Lakhs
b) Fixed Asset investment
(11.50
Lakhs)
2017-18
7.77 Lakhs
9.33 Lakhs
11.19 Lakhs
7.77 Lakhs
9.33 Lakhs
11.19 Lakhs
4 Lakhs
d)Net Cash flow from
operations (a-b+c)
2016-17
20 Lakhs
c) Shifting of old asset
allowed upto 20%
2015-16
5.40 Lakhs
e) Net cash flow at end of 5
years
28.68 lakhs
f) Difference in Rent from STPI
to SEZ
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15. Cost
We provide end to end compliance services for SEZ units. Cost of SEZ
registration is:
Particulars
Fees (In INR)
SEZ Registration with Cochin SEZ and
obtaining Letter of Approval
2,00,000
Terms & Conditions
•Unless a shorter period is established in the invoice, Client will promptly pay not later than 30 days
from the relevant invoice date failing which interest will become due at a rate of 1.5% per month
from the Due Date up to date payment is actually received.
•As fees quoted to the Client are based on the information provided by the Client and are
applicable to the time of submitting the fee quotation, the Firm reserves the right to increase its
charges if the Client’s instructions are found to be not in accordance with the initial details supplied
or used for the purpose of obtaining a fee quotation. Clients will be notified of any increase in fees.
•Additional fees shall be charged for (i) operations that are not included in the Contract and / or (ii)
rush orders, cancellation or rescheduling of services or any partial or full repeats which will be
payable at the Firm’s prevailing charging rates.
•Unless otherwise stated all fees quoted are exclusive of travelling and subsistence costs (which will
be charged to the Client at cost). All fees and additional charges are exclusive of any applicable
Service Tax.
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16. CONTACT US
# 137, B/w 4th and 5th Main, MES College Road, 15th cross, Malleshwaram,
Bangalore – 560003
(080) 2344 3636 99451 79868 bcshettyco@gmail.com
Namratha Icon ,# 3 2nd Floor, Kundalahalli Extension, ITPL Main road, Opp.
Sterling Brookside Apartments, Bangalore – 560 037.
99807 79868 / 98447 17161
Stylus Serviced Offices, Ground Floor, E 1 Block, Beech Building, Manyata
Embassy Business Park, Outer Ring Road, Bangalore 560045 , 080-42764562
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