Frequently Asked Questions (FAQs)

1.      What is a Free Trade Warehousing Zone (FTWZ)?

The Free Trade Warehousing Zone is a Special Economic Zone wherein trading and warehousing and other activities related thereto are carried out. It is a deemed foreign territory within the geography of India for the purpose of tariff and trade.

2.      What is the governing Act and Rule for FTWZ?

The Special Economic Zones Act 2005 and the Special Economic Zones Rules 2006 are the legal framework for FTWZ. Instructions are also issued by the Ministry of Commerce & Industries from time to time to clarify various operational aspects of FTWZ.

3.      What are the activities allowed inside the FTWZ?

• Warehousing of goods on behalf of foreign or domestic clients
• Trading with or without labelling
• Packaging and repacking
• Re-sale, re-invoice, or re-export of goods
• Assembly of complete and semi-knockdown goods
• Kitting and various value optimization services on the goods/cargo

4.      In what ways can companies operate through FTWZ?

·       There are two ways in which companies can operate through FTWZ:
Trading Unit: A company can become a Unit in the FTWZ for the purpose of trading, warehousing and other related activities called authorized operations.

·       Service Unit: Company can avail themselves of the services of Ascent FTWZ at Panvel, which is a Unit in FTWZ, for trading, warehousing and other related activities called authorised operations. Ascent FTWZ at Panvel will provide various value-added services to its clients.

5.      What is the nature of authorized operations in the FTWZ?

In an FTWZ, the authorized operations comprise of trading, warehousing, packing, labelling, lashing, shrink wrapping, strapping, palletisation, bottling, clubbing, consolidation, quality checking, testing, kitting, combination packing etc. may be authorised by the Unit Approval Committee in Letter of Approval.

6.      What is a Letter of Approval (LOA)?

A Letter of Approval is the permission granted by the Unit Approval Committee to an entrepreneur to set up a unit in the FTWZ to carry on authorized operations. LOA is valid for five years from the date of commencement of the activity. It is extendable for a further five years at a time.

7.      Who can become a Unit in an FTWZ?

Any Indian entity who are Trader, Importers / Exporters, 3PLs, CHAs, Freight Forwarders, Shipping Lines, Manufacturers etc., can become Units in the FTWZ. The Units are required to execute a bond-cum-legal undertaking for import and warehousing of goods inside the FTWZ.

8.      What kind of export benefit is available in FTWZ?

Export entitlement is available for supply of goods from Domestic Tariff Area (DTA) to FTWZ for authorised operations. The Unit or Developer can claim drawbacks or Duty Entitlement Passbook in respect of goods procured from DTA. Alternatively, the same can be claimed by the DTA supplier based on a disclaimer from the Unit or Developer.

9.      Is service tax exempt in an FTWZ?

Inbound taxable services as well as those performed inside the FTWZ for use in authorised operations are exempt from service tax. Similarly, taxable services in relation to transportation of goods from Port to FTWZ or from one FTWZ to another FTWZ would also be exempt.

10. Is customs duty exempt for import into FTWZ?

Customs duty is exempt when goods are imported into FTWZ for authorised operations.

11. At what stage is customs duty payable in the FTWZ?

Customs duty and GST becomes payable at the time of clearance of goods into DTA. In case of piecemeal clearance, the customs duty would be payable on such piecemeal quantity cleared into DTA and not on the full quantity received into FTWZ. Therefore, the customs duty can be deferred by importing the goods into FTWZ.

12. How long can goods be stored in the FTWZ without payment of customs duty?

Imported goods can be stored in FTWZ for long periods till the validity of LOA of a Unit. FTWZ is the only scheme in India which allows deferment of customs duty without incurring interest or penalty

13. How is the treatment for supply of goods from DTA to FTWZ?

The supply of goods from DTA to FTWZ is considered as an export as per the SEZ Act. Hence, benefits available for export out of India are also available for supplies from DTA to FTWZ.