SEZ unit approval: UAC, LoA and BLUT

Why SEZ approval is needed

An IFSC unit operates inside a special economic zone. It therefore needs two kinds of permission: IFSCA's licence, registration or authorisation for its financial activity, and approval as a unit in the SEZ under the Special Economic Zones Act, 2005 and the SEZ Rules, 2006. The first is about the business, the second is about operating within the zone and its customs and tax framework.

For the IFSC, IFSCA performs the SEZ Administrator's role. Its July 2026 workflow for setting up on SWIT refers to the "Administrator (IFSCA)" issuing the Letter of Approval and accepting the bond-cum-legal undertaking. The SEZ approval is decided by the Unit Approval Committee (UAC).

One application, two tracks

The SEZ application is no longer a separate first filing. Under IFSCA's workflow, the application on SWIT is a joint application to the Administrator (IFSCA) and to IFSCA as the regulator. The Common Application Form carries a section of SEZ-specific information for this purpose, including:

• the applicant's bank, digital signature identifier and PAN;
• investment in office equipment, split between indigenous and imported, and the sources of finance;
• the office area required and expected employment;
• equity capital and its split between foreign, Indian and IFSC holding;
• any earlier licence or approval under the EOU, SEZ, STP or EHTP schemes; and
• whether the applicant or its directors or partners face proceedings or debarment under the foreign trade, foreign exchange, customs or central excise laws.

The SEZ section ends with an undertaking supported by a sworn affidavit. The CAF also requires an SEZ fee of Rs 5,000, paid to the Pay and Accounts Officer of the Kandla Special Economic Zone, and a copy of the provisional letter of allotment for the premises.

The steps

1. Identify office space with a co-developer, sign a letter of intent, and obtain the provisional letter of allotment and no-objection certificate.
2. Where the unit is a new company or LLP, incorporate it and obtain PAN and TAN.
3. File the joint application on SWIT.
4. Correct any deficiencies in the SEZ application on the SEZ Online portal. Once the application is placed on the UAC agenda, the applicant receives a meeting invitation by email and appears before the UAC, online or in person.
5. On approval, the Administrator (IFSCA) issues the Letter of Approval through SEZ Online. The applicant then sends the Letter of Approval to the IFSCA regulatory team through SWIT or by email.
6. Submit the bond-cum-legal undertaking in Form H to the Administrator. The approved undertaking and an eligibility certificate are issued by email, and the approved undertaking is then uploaded on SEZ Online.
7. Enter into the lease with the co-developer and file a copy on SWIT within 6 months of the Letter of Approval.

IFSCA describes the workflow as indicative and subject to the applicable regulations. What follows the Letter of Approval is covered in After approval.

The Letter of Approval and the undertaking

Under rule 19 of the SEZ Rules, the Letter of Approval is issued in Form G. The rule makes it valid initially for one year, within which the unit must start its activity and tell the authorities the date it started, and it allows extensions on conditions. Treat the commencement deadline as part of the plan from the outset.

The bond-cum-legal undertaking in Form H is made under rule 22. In it, the unit undertakes to use and account properly for goods it imports or procures free of duty, and to achieve positive net foreign exchange earnings. Its value is linked to the duties forgone on the goods the unit expects to bring in. If needs grow, the unit must top up the undertaking with an additional one. For a company, a managing director, director or other person authorised by board resolution executes it.

Ongoing SEZ compliance and common pitfalls

Approval brings continuing SEZ obligations. Units submit annual performance reports in Form I, which are placed before the Approval Committee. Under rule 54, the committee monitors whether the unit achieves positive net foreign exchange earnings and complies with its Letter of Approval and undertaking; a failure can lead to penal action under the Foreign Trade (Development and Regulation) Act, 1992. See SEZ compliance.

Points that commonly cause delay:

• applying before the provisional allotment of premises is in hand, since the CAF asks for it;
• leaving SEZ Online deficiencies or UAC queries unanswered, which keeps the file off the UAC agenda;
• signing the lease before the Letter of Approval, or missing the 6-month window for filing it on SWIT;
• understating the undertaking, which leads to a top-up later; and
• treating the IFSCA in-principle approval as if it were the SEZ approval, or the reverse. Each is needed.