Interactive Session on SEZ Compliance at Brigade Tech Gardens SEZ, Bangalore.

A Physical interactive session on Sez, Rules and procedures was held exclusively for SEZ Developer & SEZ units in the premises of Brigade Tech Garden SEZ, Bangalore on the 14th November 2024, Customs Authorised officer of the SEZ and EPCES, Bangalore interacted with them, detailed presentation was done by Mr Madhusudan Rao of SCL Logistics & CHA, Bangalore helping the SEZ units & the Developer to operate within the SEZs while ensuring smooth compliance within the regulatory framework.  Details of the compliance requirements is highlighted as below: -

Key Compliance Obligations for SEZ Units  

Special Economic Zones (SEZs) are designated areas where business and trade laws differ from the rest of the country, typically with the aim of attracting foreign investment, promoting exports, and creating jobs. SEZs are governed by the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006, along with various regulations from different government agencies

Regulatory Compliances :-      Development and Administration:  The developer must monitor activities within the zone, ensuring that businesses comply with regulations and that the infrastructure, created for this purpose, is maintained in good condition including safeguarding the infrastructure and materials.

    Customs and Export Regulations: The Central Board of Indirect Taxes and Customs (CBIC) is responsible for regulating imports and exports. Within the SEZ, Customs Authorities oversee the clearance of goods, ensuring they are used for permissible purposes. SEZ companies must comply with customs procedures and maintain records of their import/export transactions.

Compliance with SEZ Rules: Operational Compliance: SEZ units must ensure they follow the rules laid out in the SEZ Act, such as setting up export-oriented production, maintaining minimum export obligations and ensuring compliance with conditions set by the Board of Approval (BoA), LoA Terms and Conditions and other relevant authorities. Annual Performance Reports: SEZ units     are required to submit annual performance reports to the government, detailing their exports, investments, employment generation, and other operational data.

Labour and Employment Regulations: SEZs are required to follow the labour laws that govern employment, including the Factories Act, Minimum Wages Act, Labour Laws and the Industrial Disputes Act, but there are some relaxations in terms of the number of work hours, overtime regulations, and hiring procedures.

Environmental Protection Laws: SEZs are subject to the environmental regulations of India, including the Environment Protection Act, 1986, Water (Prevention and Control of Pollution) Act, 1974, and Air (Prevention and Control of Pollution) Act, 1981. They are required to maintain a certain level of environmental compliance and, if necessary, obtain environmental clearances. Waste Management: SEZs are required to manage industrial waste, including hazardous waste, and ensure that they are disposed of or treated in accordance with environmental standards.

Security and Safety: SEZs are considered high-security areas, particularly with respect to the movement of goods, people, and information. SEZ developers and units are responsible for implementing security measures, such as surveillance and monitoring systems, to prevent illegal activities, including smuggling and unauthorized access. Compliance with National Security Laws like Foreign investors and companies are subject to clearance under the Foreign Exchange Management Act (FEMA) and Foreign Direct Investment (FDI) policy.

State and Local Government Regulations: State governments are also involved in revenue records (land Records), ensuring law and order, and providing infrastructure like roads, water, and electricity and other amenities. Local Compliance must comply with local laws, land-use regulations, and other municipal/Corporate regulations related to business operations, such as Garbage management and local tax liabilities.

  Conclusion: SEZ’s offer various incentives to promote business and exports, businesses operating within these zones must adhere to strict regulatory frameworks set by both Central and State governments to maintain the integrity of the SEZ system. 

 Imports and Local Procurements Including Service:

 Import:  •      SEZs are subject to security and regulatory checks. This includes verifying the legitimacy of the goods being imported to ensure that they are not prohibited under India's security or foreign exchange laws.

    All the Goods Cleared at Air/Sea port comes with a Customs Seal. It has to be verified by the Authorized Officer and allowed materials for usage(Out of Change). Until the verification, the importer cannot have rights to unload and use the goods. It is a violation of terms and conditions of the LoA, failing which the officer can take necessary action against you and recommend the case for adjudication.

   The importer must complete the re-warehousing (RWC) process through the online system.

Local Procurements and Services •      GST registered vendors only eligible for SEZ supplies.

•      All local procurements with IGST-exempted invoices must be filed online and approved by the proper officer. The endorsed copy must then be forwarded to the concerned departments (i.e., GST/Central Tax) within 45 days, as per SEZ Rule 30(4). Failure to do so will result in GST/Central Tax officers raising the tax or duty against the DTA supplier. Since the SEZ is considered foreign territory, all procedures must be completed by the developer/unit on behalf of the supplier.

•      The Authorized Officer has the right to inspect materials whenever deemed necessary, based on the value and volume of the goods. The movement of materials must occur during working hours to ensure a smooth flow of activities. For any inward materials arriving on holidays, prior consent from the Authorized Officer is required to avoid delays in entry and ensure a smoother workflow.

•      Service Endorsement: The uniform list of services exempted from Local Taxes vide File No. D.12/19/202013-SEZ  Dt. 2^nd January 2018. all the services rendered to sez Developer/Unit  has to get endowment from the Authorized Officer. 

        Export and Local Sales: •      All physical exports must comply with Rule 45 and Rule 46 of the SEZ Rules, 2006. Software exports fall under Rule 45(3) of the SEZ Rules, 2006. Local sales must comply with Rule 47, 48 of the SEZ Rules, 2006.

For exports under LUT (Letter of Undertaking), no duty is applicable. However, for local sales, applicable duties and taxes must be paid before the removal of goods

 Event Compliance: Every SEZ shall be under administrative control of the Development Commissioner as per Rule 20 of SEZ Rules 2006. Trade exhibitions, fairs, or promotional events within the SEZ, particularly those focused on business or exports, may need to comply with additional regulations governing trade and customs activities. Such events might also require approvals from the Development Commissioner under rule 33(ii) of SEZ Rule 2006

 Scrap/ Waste removal and other related activities

Scrap, Packing waste, Hazardous waste can be removed from the SEZ after completing the SEZ formalities under rule 47 of SEZ Rules 2006

Mandatory Compliances:

There should be Valid eRCMC of EPCES for the Developer & with SEZ units, needs to be renewed for 1 year or for 3 years.

-APR should be filed for the previous FY within 180 days from the beginning of the new FY   

   The Regional Director of EPCES Karnataka Region Shri C U Poovaiah IRS (R) in his keynote address had highlighted the activities of EPCES, achievements in addressing the problems of SEZ, Key pending issues taken up by EPCES, also stressed upon the importance of all the mandatory compliances for ease of doing export services/business. The EPCES Brochure - 2024 is also distributed to all the participants.

   The Customs Authorized Officer of the SEZ Ms. Athiya Sadath in her keynote address informed  the SEZ units and the Developer to file documents for approvals (if any) well in advance with all necessary enclosures  and get the approvals by the competent authorities well in advance for hassle free clearances/ approvals and thanked Mr Madhusudhan Rao of SCL Logistics & CHA Bangalore for the presentation, also thanked Mr Vivek George EPCES RGC member &  AGM - Business Development of Brigade SEZ and the EPCES for organising this well thoughtful physical event.

The event was organised / fully supported & moderated by Sri Vivek George the RGC Member of EPCES-CSEZ Karnataka Region.

There were 40 participants (including officials) who were EPCES Members of SEZ units from Brigade Tech Garden SEZ, Bangalore. The members were contented and have benefited from this physical event on Compliance requirements by SEZ Developer and SEZ units.