SPECIAL ECONOMIC ZONES ACT, 2005

Section 7. Exemption from taxes, duties or cess.

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

(ii) a Developer;

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.

Section 18. International Financial Services Centre.

(1) The Central Government may approve the setting up of Setting up of an International Financial
Services Centre in a Special Economic Zone and may prescribe the requirements for setting up and
operation of such Center:

Provided that the Central Government shall approve only one International Financial Services Centre in a
Special Economic Zone.

(2) The Central Government may, subject to such guidelines as may be framed by the Reserve Bank, the
Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and such
other concerned authorities, as it deems fit, prescribe the requirements for setting up and the terms and
conditions of the operation of Units in an International Financial Services Centre.

Instruction No. 85 – 2nd Aug 2016 – Related to Work from home

 For authorized employees of IT/ITES regd with DOT only.
 Regular employee of SEZ and authorized
 Work is for authorized services only and related to SEZ projects
 Secured connectivity provided
 Export revenue accrues to SEZ. Cannot work related to exports outside of SEZ

Section 46. Identity Card.

Every person, whether employed or residing or required to be present in a Special Economic
Zone, shall be provided an identity card by every Development Commissioner of such Special
Economic Zone, in such form and containing such particulars as may be prescribed.
Special Economic Zones Rules, 2006
Rule 53. Net Foreign Exchange Earnings. - The Unit shall achieve Positive Net Foreign Exchange
to be calculated cumulatively for a period of five years from the commencement of production
according to the following formula, namely:-
Positive Net Foreign Exchange = A - B > 0
Where, - A : is Free on Board value of exports , B is CIF value of imports

Rule 53A Exemption.- Nothing contained in rule 53 shall apply,-

A. to a Unit in an International Financial Service Centre set up as Alternate Investment Fund or
Mutual Fund …………….
B. to a Unit in an International Financial Service Centre set up as an International Financial
Service Centre Insurance Office ……………

Rule 43. Sub-contracting for Domestic Tariff Area unit for export.-
A Unit may, on the basis of annual permission from the Specified Officer, undertake sub-
contracting for export on behalf of a Domestic Tariff Area exporter, subject to following
conditions, namely:-
(a) all the raw material including semi-finished goods and consumables including fuel
shall be supplied by Domestic Tariff Area exporter;
(b) finished goods shall be exported directly by the Unit on behalf of the Domestic Tariff
Area exporter:
Provided that in case of subcontracting on behalf of an Export Oriented Unit or
an Electronic Hardware Technology Park unit or an Software Technology Park
unit or Bio Technology Park unit, the finished goods may be exported either from
the Unit or from the Export Oriented Unit or Electronic Hardware Technology
Park unit or Software Technology Park unit or Bio-Technology Park unit;
(c) export document shall be jointly in the name of Domestic Tariff Area exporter and
the Unit;
(d) the Domestic Tariff Area exporter shall be eligible for refund of duty paid on the
inputs by way of brand rate of duty drawback.
Provided that, -
(i) Employees of Information Technology and Information Technology enabled Services Special
Economic Zone units and Information Technology and Information Technology enabled Services
units registered as Other Service Provider with Department of Telecommunications, employees
temporarily in-capacitated, employees travelling and offsite employees of Special Economic
Zones may be permitted to work from home or from a place outside the Special Economic Zone
subject to the following conditions, namely:-
(a) A regular employee of the Special Economic Zone unit, who has been issued identity
card as per sub-rule (2) of rule 70 shall be authorised by the Special Economic Zone unit
to undertake the work pertaining to that unit.
(b) The work to be performed by the employee permitted to work from home shall be as
per the services approved for the Special Economic Zone unit, and the work is related to
a project of the Special Economic Zone unit.
(c) For the purpose of work from home, Special Economic Zone unit shall provide laptop
or desktop and secured connectivity (for e.g Virtual Private network, Virtual Desktop
Infrastructure) to establish a connection between the employee and work related to the
project of the Special Economic Zone unit.
(d) Special Economic Zone unit shall ensure export revenue of the resultant products or
services to be accounted for by the Special Economic Zone unit to which the employee is
tagged and at no given point shall work from home involve the export of services from
outside the Special Economic Zone unit.
(e) Once the employee ceases to be part of the project of Special Economic Zone unit,
the employee shall be untagged from the respective Special Economic Zone unit and the
unit shall surrender the I-Card to Specified Officer as per sub-rule (2) of rule 70.
(ii) Information Technology and Information Technology enabled Services Units in Domestic
Tariff Area shall carry out their job-work in a Special Economic Zone Unit by following the
procedure as laid down in (i) above.
(iii) For Special Economic Zone units registered as Other Service Providers with Department of
Telecommunications and availing the benefit of Work from Home, the laid down Other Service
Provider guidelines issued by Department of Telecommunications and amended from time to
time, shall be followed by Special Economic Zone units.

Rule 42. Procedure for sub-contracting in Domestic Tariff Area or in a Unit in other SEZ
or in Export Oriented Unit or in Electronic Hardware Technology Park unit or in Software
Technology Park Unit or Bio-technology Park Unit or sub-contracting abroad:
(1) A Unit may take goods, including finished goods requiring further processing or semi-
finished or semi-processed goods, including studded jewellery or inputs to the sub-contractor's
premises -
(i) for subcontracting any production process; or
(ii) part of the production, without payment of duty, subject to following conditions,
namely:-
(a) the Unit shall wherever possible apply for the permission at the time of
project approval itself and based on such initial approval, the Specified Officer
shall permit sub-contracting of part of production process(es) or part of the
production;
(b) where the permission has not been taken at the time of project approval or a
new permission is sought, the unit shall file an application containing the name
and address of the subcontractor(s), 2[Goods and Services Tax] registration
number in the case of the Domestic Tariff Area sub-contractor, if registered, and
details of the processes to be carried out or quantum of production sought to be
carried out at the sub-contractor's premises and self certified input output ratio
for the said processes;
(c) after examination of details under sub clause (b), the Specified Officer may
grant annual permission for sub-contracting any production process or sub-
contracting part of the production, as the case may be; ……………..
**(3 years approval instead of annual permission only for large manufacturers with avg
annual exports > 1000 Crores – Instruction No 78 Oct 2013)
(h) the goods sent out for sub-contracting shall be returned to the Unit within
one hundred and twenty days from the date of removal or within such period
as may be extended by the Specified Officer for reasons to be recorded in writing
for granting such extension;
1[ Provided that in case of a gems and jewellery unit, the finished goods
requiring further processing or semi-finished goods, including precious
metals, taken outside the Special Economic Zone for subcontracting by
the unit shall be brought back into the unit within twenty-eight days. ]
6[Provided further that in case of a gems and jewellery unit, studded
gold jewellery, silver jewellery and imitation jewellery, the finished goods
requiring further processing or semi-finished goods, taken outside the
Special Economic Zone for sub-contracting by the unit, shall be brought
back into the unit within forty-five days.]
NOTIFICATION - Ministry of Commerce and Industry - Government of India (Department of
Commerce)
New Delhi, the 8th April, 2015

S.O. 968 (E) :- In exercise of the powers conferred by sub-section (2) of section 18 of the
Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby notifies that
Units in an International Financial Services Centre in Special Economic Zones may be set up and
approved in accordance with rule 17 of the Special Economic Zones Rules, 2006, as amended
from time to time, subject to the guidelines or regulations framed and notified in this regard by
the Reserve Bank of India, the Securities and Exchange Board of India and the Insurance
Regulatory and Development Authority of India, as per following annexures namely:-

Annexure I: Insurance Regulatory and Development Authority of India (Regulation of Insurance

Business in Special Economic Zone) Rules, 2015, as amended from time to time.

Annexure II: Foreign Exchange Management (International Financial Services Centre)

Regulations, 2015, as amended from time to time.

Annexure III: Securities and Exchange Board of India (International Financial Services Centres)
Guidelines, 2015 as amended from time to time.

2. The units in International Financial Services Centre shall conform to the provisions of the
Special Economic Zones Act, 2005 and the rules or regulations made thereunder.

Foreign Exchange Management (International Financial Services Centre) Regulations,

2015

Regulation 3. Any financial institution or branch of a financial institution set up in the IFSC and
permitted/ recognised as such by the Government of India or a Regulatory Authority shall be
treated as a person resident outside India.

Regulation 2. Definitions:-

In these Regulations unless the context requires otherwise , -

(b) ‘Financial Institution’ shall include
i. a company, or
ii. a firm, or
iii. an association of persons or a body of individuals, whether incorporated or not, or
 iv. any artificial juridical person, not falling within any of the preceding categories
engaged in rendering financial services or carrying out financial transactions.

Explanation: For the purpose of this sub-regulation, and without any loss of generality of the
above, the expression ‘financial institution’ shall include banks, non-banking financial
companies, insurance companies, brokerage firms, merchant banks, investment banks, pension
funds, mutual funds, trusts, exchanges, clearing houses, and any other entity that may be
specified by the Government of India or a Financial Regulatory Authority.