The Government of India has made amendments to the Special Economic Zones (SEZ) rules. This aims to promote the manufacturing of semiconductors and electronic components. The changes reduce the minimum land requirement for establishing factories in SEZs from 50 hectares to 10 hectares.
The norms that are relaxed span over semiconductors, display module sub-assemblies, printed circuit boards, lithium-ion battery cells, mobile and IT hardware components, as well as hearables and wearables. For multi-product SEZs in several states and Union Territories, including Nagaland, Manipur, Mizoram, Arunachal Pradesh, and others, the minimum land required has been lowered from 20 hectares to 4 hectares. SEZ units now have more flexibility in their operations following the amendment. Manufacturers can now source capital goods, raw materials, components, and consumables from both domestic and international markets. The movement of goods has also been liberalized. SEZ units can supply goods to domestic tariff areas (DTAs) paying the applicable duties or transfer them to free trade and warehousing zones (FTWZs), even if located in different SEZs, as directed by overseas entities.
There is one significant update that affects the calculation of Net Foreign Exchange (NFE). It’s a key metric for SEZ benefits. Goods received or exported on a free-of-cost basis must now be included while calculating NFE. This aligns with Customs valuation practices. There is a need for SEZ units to maintain net foreign exchange earnings over a five-year period to qualify for incentives like duty-free import of inputs and capital goods.
India’s objective from a strategic viewpoint is to develop a robust semiconductor and electronics manufacturing ecosystem. These amendments are big steps towards accomplishing that. Initiatives like the India Semiconductor Mission (ISM) showcase government efforts to attract investments and generate employment in high-tech manufacturing through these policy relaxations.
