i) Any IT product manufacturing unit, subject to Para-6 below, shall have a right to declare itself as a Soft Bonded IT Unit. Such unit shall have the freedom to market its products domestically and also export its products. The Unit will be located in a soft bonded area subject only to fiscal and procedural controls and without a-priori physical controls.

ii) The Unit will have permission to import all its needs without payment of all import duties and on a self-declaration basis.

iii) For maximising the economy of scale and operational flexibilities, local and export production can be seamlessly integrated without any Government imposed obligations on the mix of production. The instrumentality of 'export obligation' is substituted by 'fiscally and procedurally self-regulated export incentives'. There will be no minimum export obligation and the unit will be permitted to sell even 100% of their production in the Domestic Tariff Area.

iv) On domestic sale, duty will be paid on the finished products and on all the intermediate products sold by the unit as per para - 4.

v) For maximising the velocity of business, a-posteriori controls substitute a-priori controls through a system of a Legally enforceable Undertaking (LUT) of Self-Declarations with a strict but fair post-audit control. The unit will keep accounts of utilisation of imported duty free raw-materials utilised for manufacture and render accounts which will be on the post audit basis.

vi) Aggregation of several S-BIT Units into a cooperatively managed zone or a S-BIT Habitat will be set up near suitable cities subject only to the same policy instruments under this dispensation as would apply for an individual S-BIT Unit. State Government/Central Government will make available world class Infrastructure in Telecom, Road Highway, Sanitation, Water Supply and fast-track Port/Cargo handling facilities between the S-BIT Habitat and the Import/Export gateways.

vii) The above facility will be available not only for units manufacturing finished products, but also those manufacturing primary and intermediate IT products.

viii) Where rules and procedures applicable for S-BIT Units herein are silent, those for IT Units in DTA will apply.

a) The start-up of a new S-BIT Unit or conversion of existing units into S-BIT units will be through Industrial Entrepreneur's Memorandum (IEM) in the Ministry of Industry and this should be granted within 7 days of application. If approval is not granted within 7 days of application, the acknowledged copy of IEM itself will be deemed as an automatic approval. In the case of existing EOU/EPZ/EHTP Units converting to S-BIT, the Inter-Ministerial Standing Committee (IMSC) of DOE or the Board of Approvals will first approve keeping in view (a) Customs and Excise Duties, if any, payable at the time of conversion, and (b) debonding procedures taking into consideration any unfulfilled export obligation/NFEP at the time of conversion which shall be transferred to the S-BIT Unit.

b) When the existing unit converts into an S-BIT Unit, the balance of MODVAT credit in RG-23 Part-II can be used to pay excise duty on clearance from an S-BIT Unit.

c) Any parts/subassemblies/end equipment manufacturing unit for Electronic components or Digital Electronics or Computer Hardware or Data-communication (upto but including Transducer or display parts/equipment) is also eligible for conversion/starting as an S-BIT Unit.

i) For all electronic components and other primary products (listed in Annexure-IVA) which are manufactured by the S-BIT Unit cvvand sold in DTA, the customs duty chargeable will be Nil, and the excise duty chargeable will be 8%.

ii) For priority Intermediate Products (listed in Annexure-IVB), which are manufactured in the S-BIT Unit and sold to the DTA, the customs,CVD and excise duties will be 40% of the prevailing normal rates for that product.

iii) For all IT products, other than those covered under Paras 4(i) and 4(ii), which are manufactured in the S-BIT Unit and sold to the DTA, the Customs,CVD and Excise Duties will be 65% of the prevailing normal rates for that product.

i v) The Customs duty will be payable at the end of each month as per the statement submitted by the S-BIT Unit. No interest will be charged. Any duties payable, according to standard rates given in Para 4(i), 4(ii) or 4(iii) above and Para 9 below, shall be deposited in the special account of CBEC in any public sector or CBEC-authorised bank along with LUT-self-declaration having post-audit liability as per Paras 5 and 7 below; the original certificate of receipt from the bank along with a true copy of the LUT-self-declaration will be required to be submitted to the Customs.

v) No Special Additional Customs duty will be charged on inputs or finished goods while clearing into DTA.

vi) S-BIT Unit is permitted to purchase any item from DTA.

vii) All purchase transactions into S-BIT Units will be free of Sales Tax, Entry Tax, Excise Duty, Purchase Tax/Trade Tax/Turnover Tax and Octroi. All imports of Capital Goods, Raw Materials, consumables, Components and Sub-assemblies will be free of customs duties and CVD.

viii) The objective of the scheme is to promote genuine manufacturing. Therefore, the import of any item(and SKD Kits therefor), which is on the list of items LUT Self-declared by the S-BIT unit for their selling to DTA or another S-BIT Unit, is strictly not permitted, except under the existing provisions for the import of prototypes and samples for market promotion of the product prior to manufacture and, during the phase of technology absorption not exceeding three months with a suitable sales turn over limit on these items. The c.i.f value of import of populated PCBs in items containing populated PCBs. LUT self-declared for sale to DTA, with respect to Bill of Materials value on a six monthly basis, should not be more than 10% for data communication products detailed in Para-65 and 15% for others respectively. Selling, into DTA or into another S-BIT unit, of independently housed units which are dis-assembled from any product imported into the S-BIT unit is also strictly not permitted.

If any item LUT-Self-declared by the S-BIT Unit for sale to DTA or another S-BIT Unit is an assembly of two or more independently housed units, then, every such independently housed unit should be either manufactured with change of form in any S-BIT unit, or, purchased with deemed export benefit from goods manufactured in DTA, or purchased without deemed export benefit from goods imported into DTA.

ix) An S-bit unit sourcing the inputs from DTA in lieu of direct import shall have the option to source the same against advance release orders denominated in free foreign exchange/Indian Rupee. In such cases, the license will be invalidated for direct import to that extent and the permission in the form of ARO will be issued which will entitle the DTA supplier to the benefits of deemed export. Instead of an ARO, a shipping bill LUT - Self-certified by an S-BIT Unit that they have received the goods from the DTA will also be acceptable, subject to post-audit.

x) Supplies from DTA to S-BIT units shall be treated as deemed export. Sale of Products from DTA Units to S-BIT Units shall qualify for all benefits available for physical export. The domestic manufacturers shall get duty draw-back against deemed exports to S-BIT units within 15 days of filing their application duly certified by a Chartered Accountant. This is essential in order to get domestic products into S-BIT Units at internationally competitive prices. Post-audit shall be resorted to for subsequent verification. Deemed Export status will not apply to DTA sale of any item(and SKD Kits therefor), which is LUT self-declared by the S-BIT Unit for their selling to DTA as in 4(viii) above. Deemed export benefits are not available to the sale of imported items from DTA to an S-BIT unit.

xi) Deemed export benefits can be availed through an extension of DEPB scheme or Advance Licensing scheme or Duty Drawback scheme.

xii) All the benefits available to EOU Units will also be available to S-BIT Units.

7. Post-Audit Procedure:

i) The first post-audit shall be after six months but before 18 months of executing and notifying the LUT of self-assessment. Post-audit shall be conducted by an auditor franchised by the Government. The cost of auditing will be borne by the audited unit. The Government is empowered to conduct further post-audits if a prima-facie case of violation of S-BIT scheme procedures or Customs regulations or other applicable Government regulations is found to exist or if a just and reasonable cause exists. A designated officer of the Department of Electronics will be associated with the post-audit.

ii) The documentation procedure of self assessment as per para (5) and other procedures of post-audit shall be so simplified as to give minimum chance of disputes while taking care to prevent cognizable violations of rules and procedures.

iii) As and when any dispute arises with an S-BIT Unit on Customs/Excise matters, it shall not be dealt by an officer below the rank of Commissioner of Customs/Excise.

iv) Whenever a dispute arises between an S-BIT Unit and the Customs/Excise authorities, the latter will expeditiously take an advice from the Single-Window agency of para 8 below and the advice of this agency will be binding on Customs/Excise authorities as well as on the S-BIT Unit.

v) Only officers at the rank of Assistant Commissioner of Central Excise/Customs or higher shall visit the unit.