Govt considering several measures to help revive special economic zones

The government is considering several measures such as a flexible framework for sale of products manufactured in special economic zones (SEZs) in the domestic market, easy de-notification norms, and streamlining approval processes for units, an official said.

The aim is to help revive SEZs and facilitate business transactions between SEZ and domestic tariff area (DTA) or the domestic market. SEZs are enclosures which are treated as foreign territories for trade and customs duties, with restrictions on duty-free sales outside these zones in the domestic market.

To seek views of different ministries on these measures, the commerce ministry has circulated a note on a draft SEZ (special economic zone) amendment bill 2023.

The inter-ministerial consultation is going at a fast pace and the bill is likely to be introduced in the forthcoming Winter session of Parliament which will commence on December 4 and continue till December 22.

This amendment bill will be introduced in place of the proposed Development of Enterprise and Service Hubs (DESH) bill, the official, who did not wish to be named, said.

"The amendment bill is aimed to help revive SEZs and facilitate business transactions between SEZ and DTA. It proposes to allow sales from SEZ to DTA on duty foregone basis; permitting partial de-notification of zones; easier notification norms; streamlining of approval for SEZs units," the official added.

Recently, Commerce and Industry Minister Piyush Goyal said the government is looking at easing certain restrictions for units in SEZs to promote the sector's growth.

Think tank Global Trade Research Initiative (GTRI) in a report has suggested the government to allow sale of products manufactured in SEZs in the domestic market on payment of duty foregone on inputs as that would help promote value addition.

At present, units in SEZs are allowed to sell their products in DTA on payment of duties on an output basis (finished goods). GTRI Co-Founder Ajay Srivastava said the government already allows DTA sales on payment of duty foregone on input basis to firms operating under the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme.

The government can "extend the same concession to the SEZs for parity sake. This will encourage value addition within the SEZ, as in most cases, the tariff on finished products is higher than on inputs," Srivastava said.

He added that SEZ units could be incentivised to increase value addition to avail the benefit of DTA sales, which could further enhance technological advancement and skill development.

Companies or units operating within SEZs are allowed to import materials and components duty-free, with the condition that the finished goods produced are meant to be exported out of India and sold in the Indian domestic market on payment of applicable duties on the output.

SEZs have emerged as an important contributor to India's exports. Total exports from these zones stood at USD 155.8 billion in 2022-23. These included USD 61.6 billion of merchandise and USD 94.2 billion of service exports.