What is Advance Authorisation - SEZ?
Advance Authorisation - Special Economic Zone (SEZ) mainly means two things: using Advance Authorisation for exports to SEZ units and treating some SEZ-related supplies as "deemed exports" where the buyer holds the AA.
AA for Exports to SEZ
- Advance Authorisation can be issued for "physical exports", and this specifically includes exports to SEZ units.
- In such cases, the AA holder (DTA exporter) imports inputs duty-free, manufactures the product in India, and exports the finished goods to the SEZ unit. These exports count towards export obligation like any other overseas export, irrespective of whether payment is in foreign currency or in INR.
SEZ vs AA from a Unit's Perspective
DTA Unit Requirements
A DTA unit needs to apply for Advance Authorisation each time it wants duty-free inputs and must then fulfil EO and obtain EODC.
SEZ Unit Advantages
An SEZ unit itself generally does not need Advance Authorisation for its own inputs, because SEZ law already permits duty-free imports/procurements for authorised operations (including building, plant, machinery, and raw materials) without repeated AA applications.
Supplies to AA Holders from SEZ / DTA
- FTP also treats certain supplies in DTA as "deemed exports", including supplies from DTA to AA/DFIA holders and, in some cases, from SEZ/EOU units to AA holders, subject to Chapter 7 conditions.
- In those situations, the AA holder counts the resulting exports (or deemed exports) for EO, and the supplying unit (including an SEZ unit) may be eligible for its own benefits, such as refund of certain levies, as per the deemed export provisions.
Practical Takeaways for Exporters and SEZ Units
If you are a DTA manufacturer/exporter selling finished goods to an SEZ customer, you can still use Advance Authorisation for duty-free inputs and meet your EO through those SEZ exports.
If you operate inside an SEZ, you usually rely on SEZ duty-free provisions rather than AA, but you may interact with AA holders as a supplier or buyer under the deemed export and Chapter 7 frameworks.
Eligible Products and Sectors for AA Supplies to SEZ
Advance Authorisation with SEZ is not restricted to a few products; it can cover almost any export product supplied to a Special Economic Zone, as long as inputs are physically incorporated and FTP conditions are met.
Under FTP, Advance Authorisation can be issued for "physical export, including export to SEZ units," so any DTA manufacturer or merchant exporter supplying goods to an SEZ buyer can use AA for duty-free import of inputs. This includes common SEZ-linked sectors such as textiles and apparel, engineering goods, electronics, pharmaceuticals, chemicals, IT hardware, processed food, plastics, auto components, and other manufactured products produced in DTA and exported to SEZ units or SEZ developers.
How to Place a Manufacturing Unit Inside an SEZ in India
Choose SEZ and Get Space Offer
Identify a suitable multi-product or sector-specific SEZ and obtain an in-principle/offer letter for a plot or built-up space from the SEZ developer.
Set Up / Align Your Entity
Ensure your company/LLP/firm/proprietorship is registered in India, objects allow the proposed activity, and obtain PAN and Import Export Code (IEC).
Prepare Project and Documents
Compile incorporation documents, promoter KYC, last 3 years financials, detailed project report (investment, exports, employment, utilities, pollution control), and list of capital goods/raw materials. Collect SEZ-specific papers such as the space offer letter, tentative plant layout, and any marketing/buy-back tie-ups.
Apply as SEZ Unit (Form F)
Apply online via SEZ Online and file Form F to the Development Commissioner with all enclosures and projections. Your proposal is examined and placed before the Unit Approval Committee/Approval Committee for decision.
Obtain Letter of Approval (LoA)
On approval, receive the LoA stating approved manufacturing activity, capital goods, production capacity, NFE obligations, and validity (commencement period and initial 5 year term).
Execute Lease and Legal Undertakings
Sign and register the lease deed for the approved SEZ premises within the prescribed time and submit it to the Development Commissioner. Execute the prescribed Bond cum Legal Undertaking for customs/exim compliance.
Customs Bonding and Registrations
Get the premises notified/bonded by Customs and complete SEZ Online, GST registration, and EPCES RCMC (if applicable).
Install the Plant and Import Duty-Free
Import/procure capital goods and raw materials duty-free as permitted in the LoA and install machinery and utilities in the bonded premises.
Start Production and Exports
Inform the Development Commissioner about the commencement of production on the specified date and start exports so that a positive Net Foreign Exchange (NFE) is achieved over the prescribed block of years.