Syed Tamjeed Rakhee Biswas December 21 2022 New SEZ rules provide boost for India's aircraft leasing industry Spaviatech Law | Aviation - India Syed Tamjeed, Rakhee Biswas Aviation IntroductionImport of aircraftProcurement of aircraft from domestic tariff areaProcedure for supply of aircraft on lease or outright basisProcedure for export of aircraft on lease or outright basisCommentIntroductionOn 3 October 2022, the Ministry of Commerce and Industry issued the Special Economic Zones (Fourth Amendment) Rules 2022, thereby amending the Special Economic Zones Rules 2006 in exercise of powers conferred under section 55 of the Special Economic Zones Act 2005.The rules are focused on the export, import and procurement of, procurement from or supply to the domestic tariff area of aircraft by a lessor who has setup a unit in the Gujarat International Finance Tec (Gift) City or the International Financial Services Centre (IFSC). The amendment provides clarity on the procedural aspects of such transactions. Neither the IFSC nor the Gift City has an airport of their own, so the amendment aims to facilitate business in such areas.The amendment will be incorporated within the Act after rule 29 as rule 29A. The procedures have been categorised into four subgroups:(1)the import of aircraft;the procurement of aircraft from the domestic tariff area;the supply of aircraft on a lease or outright basis; andthe export of aircraft on a lease or outright basis.Import of aircraft Importing aircraft to a unit in the IFSC requires a bill of entry, which must be filed "for home consumption in quintuplicate".(2) The bill of entry must be stamped with a special endorsement as "International Financial Services Centre Cargo"(3) and it must also indicate the port of discharge or customs landing station.The bill of entry is assessed on the basis of its transaction value by the authorised officer, who shall also register and issue a running serial number. Once the bill of entry is assessed, it will be submitted to the customs officer at the place of import, who will be responsible for examining the aircraft. Once this exercise is conducted, the customs officer shall forward the examination report to the Special Economic Zone (SEZ) customs authorised officer.(4)The procedure for importing an aircraft to a unit located in the IFSC shall be deemed complete once the SEZ customs authorised officer has received the examination report and the verification report from the assessed bill of entry. The IFSC unit must ensure that any aircraft it imports comes into the custody of an individual who has been given permission under section 45 of the Customs Act 1965.(5)Procurement of aircraft from domestic tariff area Lessors must be approved as a unit in the IFSC in order to participate in procurement transactions.(6) Following such approval, the unit must submit all tax invoices, domestic tariff area procurement documentation and any other documents prescribed under the Goods and Services Tax Act 2019 through the SEZ customs.Like the procedure to import aircraft, the procurement of aircraft from the domestic tariff area requires the submission of documents to indicate the port of receipt or landing station. Further, after the documents have been submitted, the customs officer shall examine the marks and numbers of the aircraft.Once the authorised officer has received the examination report – or verified the inspection report and the details from the document filed as per clause (b) – the procedure shall be deemed complete.Procedure for supply of aircraft on lease or outright basisThe procedure for the supply of aircraft on a lease or outright basis is similar to the above procedures. Lessors must be approved to be a unit in the IFSC. A bill of entry for a domestic tariff area sale, and other such documents indicating a port of receipt or landing station, must be submitted to customs through the SEZ online system by the IFSC unit.(7)The importer in India must pay the appropriate duty following evaluation of the bill of entry for a domestic tariff area sale.(8) After this, the marks and numbers of the aircraft will be inspected. Like the other procedures, the receipt of the customs officer's inspection or examination report at the airport, port or landing station, and the confirmation of the information on the assessed bill of entry, shall constitute the completion of the process.The customs officer at the respective customs office shall inform the authorised officer that the bill of entry for domestic tariff area sale is out of charge.(9) The authorised officer shall also be informed of the removal of the aircraft into the domestic tariff area by the customs officer at the airport, port or landing station.(10)Procedure for export of aircraft on lease or outright basisSimilar to the other procedures, lessors involved in these transactions must be an approved unit of the IFSC. All shipping bills and other such documents must be submitted by the IFSC unit with the customs office. The authorised officer must notify the appropriate customs officer at the customs airport, port or landing station regarding the examination and inspection of the aircraft's marks and numbers.Customs officials at the respective customs airport, port or landing station will examine the aircraft's marks and numbers and forward the examination and inspection report. The customs procedure for the grant of a "let export order" in relation to the goods shall be deemed to be complete upon receipt of the examination or inspection report from the customs officer at the airport, port or landing station and the verification of the details from the submitted shipping bill by the authorised officer at the SEZ.Following the issuance of the let export order, the authorised officer must instruct the customs officials at the relevant customs airport, port or landing station to permit the actual removal of aircraft from India.(11)CommentSEZs have not been as successful in India as they have been in many other nations, such as China, Korea, Malaysia and Singapore. India's attempt to industrialise through SEZs has been significantly jeopardised by a lack of sound policy formulation, effective implementation and effective monitoring.This is also the case at the Gift City, where one of the major issues with growth through aircraft leasing is the lack of a structurally sound regulatory system. This is further complicated by the absence of an airport at the Gift City.The amendment enables the aircraft leasing industry in India to develop and grow. The new rules facilitate transactions such as the export, import, supply and procurement of aircraft. As a result, international parties are likely to be more willing to invest in such markets.For further information on this topic please contact Syed Tamjeed Ahmad or Rakhee Biswas at Spaviatech Law by telephone (+91 99 9927 0013) or email ([email protected] or [email protected]). The Spaviatech Law website can be accessed at www.spaviatechlaw.com.Endnotes(1) Rules 29A(1), (2), (3) and 4, respectively, of the Special Economic Zones Act 2005.(2) Id, rule 29A(1)(a).(3) Ibid.(4) Id, rule 29A(1)(d).(5) Id, rule 29A(1)(f).(6) Id, rule 29A(2)(a).(7) Id, rule 29A(3)(b).(8) Id, rule 29A(3)(d).(9) Id, rule 29A(3)(h).(10) Id, rule 29A(3)(i).(11) Id, rule 29A(4)(h).