Securing a Letter of Approval (LOA) from the Unit Approval Committee (UAC) is only the halfway mark of setting up an International Financial Services Centre (IFSC) unit in GIFT City. Under Section 18 of the Special Economic Zones Act, 2005, every IFSC entity operates within an SEZ jurisdiction.
Before an entity can import capital goods duty-free, procure domestic services without paying GST, or commence authorized operations, it must execute a Bond-cum-Legal Undertaking (BLUT) in Form-H pursuant to Rule 22 of the Special Economic Zones Rules, 2006.
Here is an operational guide to navigating the BLUT execution and approval lifecycle in GIFT SEZ.
1. Legal Nature & Scope of BLUT (Form-H)
The BLUT is not a routine administrative form—it is a legally binding, tripartite conditional contract executed between:
The President of India (acting through the Specified Officer / Development Commissioner of GIFT SEZ),
The Unit (represented by its Authorised Signatory/Obligor), and
Designated individual witnesses.
By executing Form-H, the unit binds itself to:
Achieve positive Net Foreign Exchange (NFE) earnings as prescribed under Rule 18.
Fulfill all conditions stipulated in the Letter of Approval (LOA).
Pay applicable customs duties, integrated goods and services tax (IGST), interest, and penalties if capital goods, raw materials, or office equipment are not utilized for authorized IFSC operations within statutory timelines.
2. How to Compute the Bond Value
The bond value is not nominal; it directly determines the upper threshold of customs and tax exemptions the unit can utilize during its initial five-year block.
Formula: The bond amount must equal or exceed the total estimated Customs duty and GST exemptions projected for the upcoming five financial years.
Component Basis: The calculation sheet derives figures from the 5-year capital outlay and operational expenditure projections submitted in the Common Application Form (CAF) filed during LOA processing.
Capital Outlay & Services: Includes duty relief on imported servers, networking equipment, laptops, software subscriptions, office fit-out assets, and local DTA procurements.
Review Mechanism: The Specified Officer (Customs) verifies the Bond Value Calculation Sheet against the project report before accepting the instrument.
3. Step-by-Step Approval Workflow
[LOA Issued via SWIT / SEZ Online]
↓
[Draft Form-H & Bond Value Calculation Sheet]
↓
[Stamping in Gujarat & Notarization with Authorised Obligor]
↓
[SEZ Online Portal: Initiate "BLUT Submission" & Upload Scans]
↓
[Physical Dossier Submission to DC / Customs Office (Signature Building)]
↓
[Specified Officer Verification & Acceptance on SEZ Online]
↓
[Generation of DSPF & Zero-Rated Procurement Activation]
Step 1: Document Preparation & Board Authorisation
Before printing the bond, the company's Board of Directors must pass a resolution specifically authorising:
The execution of the Bond-cum-Legal Undertaking in Form-H under Rule 22.
A named Authorised Signatory (Obligor) to execute the bond, calculation sheet, and connected declarations.
Step 2: Stamping & Notarisation in Gujarat
The bond must be executed on non-judicial stamp paper of appropriate denomination in accordance with the Gujarat Stamp Act.
The document must be executed in Gandhinagar/Ahmedabad and notarised by a Notary Public registered in the State of Gujarat.
Both the obligor and independent witnesses must sign and append passport-size photographs along with copies of Aadhaar/PAN.
Step 3: SEZ Online Portal Filing
Log in to the unit's SEZ Online System (NSDL portal).
Navigate to Unit Configuration / Compliance Repository > BLUT Submission.
Enter bond details: Bond Value, Execution Date, Validity Period (5 years), and Obligor identification.
Upload digitally signed copies of the notarised Form-H, Bond Value Calculation Sheet, Registered Lease Deed / PLOA, and Board Resolution.
Step 4: Physical Submission to Development Commissioner
Submit the physical execution dossier (in duplicate or triplicate as instructed by the Development Commissioner's office) to the Customs/Specified Officer at the GIFT SEZ office (Hiranandani Signature Building, GIFT City, Gandhinagar):
Original Form-H on stamp paper.
Certified true copy of the LOA and acceptance letter.
Certified Board Resolution with specimen signature of the obligor.
Detailed Bond Value Calculation Sheet signed by the obligor and a practicing Chartered Accountant/Company Secretary.
KYC of the obligor and witnesses.
Step 5: Customs Scrutiny & Approval
Upon physical inspection and reconciliation of the figures, the Specified Officer updates the status on the SEZ Online portal to "BLUT Accepted".
4. Practical Checkpoints for Compliance Officers
AspectOperational RequirementRisk / Consequence of Non-ComplianceDSPF ActivationDSPF (DTA Sales/Procurement Form) cannot be filed until BLUT is approved on SEZ Online.Delay in taking delivery of IT hardware, office furniture, or fit-out services without payment of duty.Obligor LiabilityThe obligor signs in an individual capacity on behalf of the company.Personal exposure under the bond terms if misdeclarations occur regarding duty utilization.Address ChangesAny relocation across zones/towers within GIFT SEZ requires endorsement.Unapproved address shifts can lead to dynamic revocation of duty concessions under the existing bond.Bond Utilization TrackingCumulative duty forgone on imports/domestic procurement must be monitored continuously.If duty exemptions exceed the executed bond amount, the unit must file an additional/enhanced BLUT.
Conclusion
Navigating the BLUT process accurately ensures that an IFSC unit can immediately leverage the tax neutral framework of GIFT SEZ without operational friction. Preparing the bond value calculation sheet and coordinating both digital SEZ Online workflows and physical filings guarantees swift approval from the Development Commissioner's office.
