SEZ amendment Bill may be taken up in monsoon session of Parliament

The Bill will allow 'reverse job work'. This means that SEZ units will be able to do a part of the manufacturing process on its behalf for DTA units

The Special Economic Zone (SEZ) Amendment Bill — to overhaul the existing two-decade old law — is likely to come up in the monsoon session of Parliament. 

Prior to this, the commerce department is set to seek approval of the Union Cabinet for the new Bill to modernise India’s SEZ framework. 

The proposed changes in the law have been designed to align with the emerging order of global trade, attract investment and boost local manufacturing, a person aware of the matter said. 

One of the changes in the existing law aims to allow the sale of products manufactured in SEZs to the domestic market. This would be on a ‘duty foregone basis’ on raw materials, instead of finished products. At present, SEZs pay full Customs duty, in case a finished product is sold outside these zones, known as domestic tariff area (DTA). 

The Bill will allow ‘reverse job work’. This means that SEZ units will be able to do a part of the manufacturing process for DTA units. 

With the introduction of ‘reverse job work’, the manufacturers will be able to tackle the seasonality in export demand. 

“Both these changes will boost manufacturing, create employment and attract investments. The changes will also see optimum utilisation of idle capacity, considering that the export market can be unpredictable and demand can fluctuate. There has also been long-standing demand from the industry on these issues and they are also prevalent across the world,” the person cited above told Business Standard. 

Another change will be to allow local companies to make payment in Indian currency in case services are availed from SEZ units.

Under the existing law, payment for services is to be made in foreign exchange. The amendment will make services at par with the manufacturing sector. 

Once the Bill gets the nod of the Cabinet, the plan, thereafter, is to introduce it in the monsoon session of Parliament slated to begin next week. 

Once passed by Parliament, the new law will replace the existing SEZ Act, 2005, the person said. 

SEZs are areas within the country that have different economic regulations and are considered a foreign territory, with primary focus on promoting exports and attracting investments. 

The SEZ (Amendment) Bill has been in the works for over two years. The government believes that its performance has not been up to the mark and has not attracted investments in manufacturing.

 

The changes will also enable easier integration of SEZs with the domestic market. So, firms in SEZs will not lose out due to restricted market access. 

During FY25, exports from SEZs grew 7.4 per cent year-on-year to $172.3 billion, according to government data.