3. Procedure for making proposal to establish Special Economic Zone.—(1) A Special Economic
Zone may be established under this Act, either jointly or severally by the Central Government, State
Government, or any person for manufacture of goods or rendering services or for both or as a Free Trade
and Warehousing Zone.
(2) Any person, who intends to set up a Special Economic Zone, may, after identifying the area, make
a proposal to the State Government concerned for the purpose of setting up the Special Economic Zone.
(3) Notwithstanding anything contained in sub-section (2), any person, who intends to set up a
Special Economic Zone, may, after identifying the area, at his option, make a proposal directly to the
Board for the purpose of setting up the Special Economic Zone:
Provided that where such a proposal has been received directly from a person under this sub-section,
the Board may grant approval and after receipt of such approval, the person concerned shall obtain the
concurrence of the State Government within the period, as may be prescribed.
(4) In case a State Government intends to set up a Special Economic Zone, it may after identifying the
area, forward the proposal directly to the Board for the purpose of setting up the Special Economic Zone:
Provided that the Central Government may,—
(a) after consulting the State Government concerned;
(b) without referring the proposal for setting up the Special Economic Zone to the Board; and
(c) after identifying the area,
suo motu set up and notify the Special Economic Zone.
(5) Every proposal under sub-sections (2) to (4) shall be made in such form, and, manner, containing
such particulars as may be prescribed.
(6) The State Government may, on receipt of the proposal made under sub-section (2), forward the
same together with its recommendations to the Board within such period as may be prescribed.
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(7) Without prejudice to the provisions contained in sub-section (8), the Board may, after receipt of
the proposal under sub-sections (2) to (4), approve the proposal subject to such terms and conditions as it
may deem fit to impose, or modify or reject the proposal.
(8) The Central Government may prescribe the following requirements for establishment of a Special
Economic Zone, namely:—
(a) the minimum area of land and other terms and conditions subject to which the Board shall
approve, modify or reject any proposal received by it under sub-sections (2) to (4); and
(b) the terms and conditions, subject to which the Developer shall undertake the authorised
operations and his obligations and entitlements:
Provided that different minimum area of land and other terms and conditions referred to in clause (a)
may be prescribed by the Central Government for a class or classes of Special Economic Zones.
(9) If the Board,—
(a) approves without any modification the proposal received under sub-sections (2) to (4), it shall
communicate the same to the Central Government;
(b) approves with modifications the proposal received under sub-sections (2) to (4), it shall,
communicate such modifications to the person or the State Government concerned and if such
modifications have been accepted by such person or State Government, the Board shall communicate
the approval to the Central Government;
(c) rejects the proposal received under sub-sections (2) to (4), it shall record the reasons therefor
and communicate the rejection to the Central Government which shall intimate to the State
Government or the person concerned.
(10) The Central Government shall, on receipt of communication under clause (a) or clause (b) of
sub-section (9), grant, within such time as may be prescribed, a letter of approval on such terms and
conditions and obligations and entitlements as may be approved by the Board, to the Developer, being the
person or the State Government concerned:
Provided that the Central Government may, on the basis of approval of the Board, approve more than
one Developer in a Special Economic Zone in cases where one Developer does not have in his possession
the minimum area of contiguous land, as may be prescribed, for setting up a Special Economic Zone and
in such cases, each Developer shall be considered as a Developer in respect of the land in his possession.
(11) Any person who, or a State Government which, intends to provide any infrastructure facilities in
the identified area referred to in sub-sections (2) to (4), or undertake any authorised operation may, after
entering into an agreement with the Developer referred to in sub-section (10), make a proposal for the
same to the Board for its approval and the provisions of sub-section (5) and sub-sections (7) to (10) shall,
as far as may be, apply to the said proposal made by such person or the State Government.
(12) Every person or the State Government referred to in sub-section (11), whose proposal has been
approved by the Board and who, or which, has been granted letter of approval by the Central
Government, shall be considered as a Co-Developer of the Special Economic Zone.
(13) Subject to the provisions of this section and the letter of approval granted to a Developer, the
Developer may allocate space or built up area or provide infrastructure services to the approved Units in
accordance with the agreement entered into by him with the entrepreneurs of such Units.
4. Establishment of Special Economic Zone and approval and authorisation to operate it to,
Developer.—(1) The Developer shall, after the grant of letter of approval under sub-section (10) of
section 3, submit the exact particulars of the identified area referred to in sub-sections (2) to (4) of that
section, to the Central Government and thereupon that Government may, after satisfying that the
requirements, under sub-section (8) of section 3 and other requirements, as may be prescribed, are
fulfilled, notify the specifically identified area in the State as a Special Economic Zone:
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Provided that an existing Special Economic Zone shall be deemed to have been notified and
established in accordance with the provisions of this Act and the provisions of this Act shall, as far as
may be, apply to such Zone accordingly:
Provided further that the Central Government may, after notifying the Special Economic Zone, if it
considers appropriate, notify subsequently any additional area to be included as a part of that Special
Economic Zone.
(2) After the appointed day, the Board may, authorise the Developer to undertake in a Special
Economic Zone, such operations which the Central Government may authorise.
5. Guidelines for notifying Special Economic Zone.—The Central Government, while notifying
any area as a Special Economic Zone or an additional area to be included in the Special Economic Zone
and discharging its functions under this Act, shall be guided by the following, namely:—
(a) generation of additional economic activity;
(b) promotion of exports of goods and services;
(c) promotion of investment from domestic and foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities; and
(f) maintenance of sovereignty and integrity of India, the security of the State and friendly
relations with foreign States.
6. Processing and non-processing areas.—The areas falling within the Special Economic Zones
may be demarcated by the Central Government or any authority specified by it as—
(a) the processing area for setting up Units for activities, being the manufacture of goods, or
rendering services; or
(b) the area exclusively for trading or warehousing purposes; or
(c) the non-processing areas for activities other than those specified under clause (a) or clause (b).
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.