How Updated SEZ Rules are Transforming the Manufacturing Sector

Understanding the New SEZ Regulations

The government has introduced significant changes to the regulations governing Special Economic Zones (SEZs), aiming to boost investment and flexibility in the manufacturing sector. This initiative primarily targets industries related to electronics, IT hardware, and textiles.

Reduction in Minimum Land Area for SEZs

One of the most notable changes is the reduction in the minimum land area required for establishing an SEZ. Previously, a minimum of 50 hectares was necessary. Under the new rule, only 10 hectares are needed for manufacturing SEZs in electronics, IT hardware, and related products. In Gujarat, merely 4 hectares are required for textile SEZs. This change allows a mobile phone component manufacturer, for example, to set up a unit with much less land than before.

Flexibility for Smaller SEZs and Leased Land

The government now allows the establishment of SEZs on smaller, encumbered plots or leased land. This offers immense flexibility for start-ups and smaller businesses. For instance, a start-up can lease 10 hectares from a government agency to begin manufacturing smartwatches.

Facilitated Movement of Finished Goods

Exporters in SEZs can now send their finished goods to overseas clients without paying duties. Alternatively, they can move these goods to a Free Trade and Warehousing Zone (FTWZ). A chip manufacturer, for example, can transfer goods to an FTWZ near a port, bypassing customs duties.

Manufacturing Services for Overseas Entities

Overseas entities can now send raw materials to Indian SEZs for manufacturing purposes without incurring duties. A global electronics brand can, for instance, send display module components to an Indian SEZ unit for assembly and re-export to international markets.

Net Foreign Exchange (NFE) Calculations

The value of goods supplied to overseas entities on a free-of-cost basis will now be included in NFE calculations. A semiconductor company assembling products for a global client can count these goods towards its NFE targets.

In summary, these changes to SEZ regulations are designed to make India a more attractive destination for manufacturing investments. By reducing land requirements and offering greater flexibility, the government hopes to attract more industries in the electronics, IT hardware, and textile sectors, fostering growth and innovation.