Govt Relaxes SEZ Rules For Semiconductors And Electronics

Chennai: Amidst falling exports from Special Economic Zones, the government has relaxed the land requirement for SEZs and allowed sale of products in Domestic Tariff Area for semiconductors and electronics.

The Ministry of Commerce and Industry has made significant changes to the regulatory framework governing India’s Special Economic Zones (SEZs) to align policy with the evolving needs of high-tech manufacturing sectors, especially semiconductors and electronics, and to improve operational flexibility in land usage and export logistics.

The new rules will be applicable for electronic components including display screens, camera and battery parts, printed circuit boards (PCBs), lithium-ion battery cells, mobile and IT hardware wearables like smartwatches and hearables like earbuds.

If a company wants to set up an SEZ just for making semiconductors or electronic parts, they only need 10 hectares or more of land. This is a big change that lowers the entry barrier for businesses in the electronics industry. “The relaxation of contiguous land area requirements—from 50 hectares to just 10 hectares—and allowing use of encumbered land are landmark steps. This will help MSMEs and start-ups flourish further and boost chip, electronic manufacturing and investor interest,” said Ashok Chandak, president of India Electronics and Semiconductor Association.

Minimum land size also has been reduced from 20 to 4 hectares for certain SEZs.

Further, the earlier requirement of having SEZ land to be completely free of any legal claims or debts too has been relaxed. If the land is already mortgaged or leased to the central or state government or their authorized agencies, it can still be used to set up an SEZ. However, the reason for allowing this must be clearly mentioned. This change will help developers use more land options, especially in urban areas where clean, unclaimed land is hard to find.

The SEZ units also can export the goods directly outside India, move them to a Customs Bonded Warehouse, sell them in the Domestic Tariff Area by paying the required duties, or move them to a Free Trade and Warehousing Zone (FTWZ) in the same or a different SEZ. This gives businesses more ways to manage their inventory and reach customers both in India and abroad.

The value of both received and supplied goods, even if some of those goods were provided free of cost will be counted. This is important because SEZ units are required to earn net foreign exchange, bringing in more foreign currency than they spend. The value of free goods will now be included in these calculations using standard customs valuation methods. end