The Commerce Department has been actively discussing proposals with the Finance Ministry on measures to boost the manufacturing competitiveness of SEZs
| Photo Credit:
NAGARA GOPAL
The recently announced committee for “larger reforms in SEZ policy” will review the fiscal impact of SEZs and related reforms on revenue and taxes, including foregone duties, and assess the cost-benefit outcomes in terms of exports, investment and economic activity, according to the terms of reference (ToR).
“…Recommend short-term, medium-term and long-term policy, legal and procedural reforms, including possible amendments to the SEZ Act/Rules, and suggest an implementation roadmap with clear guidelines,” the ToR noted.
The committee, steered by the Commerce Department and including representatives from the Finance Ministry and NITI Aayog, has been tasked with undertaking a background study focused on the harmonisation of various export promotion schemes, including SEZs, EOUs, Manufacture and Other Operations in Warehouse (MOOWR), Advance Authorisation, EPCG and DFIA. It will submit a concept paper recommending a roadmap for broad-based reforms to formulate an SEZ 2.0 policy.
The Commerce Department has been actively discussing proposals with the Finance Ministry on measures to boost the manufacturing competitiveness of SEZs and make them more attractive, particularly after the sunset clause on income-tax exemptions took effect in April 2020.
‘Endless loop’
The recent focus has also been on measures that could help SEZ exporters better leverage the domestic market as they grapple with global uncertainties and US tariffs.
The industry, however, is looking for fast implementation of measures already discussed within the government for long. “The measures on SEZs taken by the government so far are in very small doses while the big proposals have been consistently put off. A number of studies, including the Baba Kalyani report, the World FZO report and the DESH Bill, have examined SEZ reforms. What is required is implementation of the recommendations that the government is ready for. We can’t keep moving in this endless loop,” an industry official told businessline.
Responding to long-standing industry demands and global disruptions due to US tariffs, Finance Minister Nirmala Sitharaman proposed a special one-time measure allowing SEZ manufacturing units to sell goods in the Domestic Tariff Area (DTA) at concessional duty rates.
SEZ units, however, have been seeking such concessions on a permanent basis. The industry has long demanded that SEZ units be allowed to sell in the DTA on a “duty-foregone” basis to reduce the duty burden. This would mean that the duty payable would be based on the duty on the raw materials used to manufacture the goods, rather than the customs duty on the final product.
In their budget proposals, SEZ stakeholders had also sought the introduction of reverse job-work (allowing SEZ units to perform production or processing tasks for the DTA or local market) and permission for INR payments for services provided by SEZ units to domestic entities.
“The committee shall submit concept paper/roadmap/suggestions/amendments within six months or a term as extended, along with its recommendations,” the TOR stated.
Published on March 10, 2026