Special Economic Zone (SEZs)

Special Economic Zone (SEZs): Recently Govt relaxes SEZ rules for semiconductor, electronics manufacturing.

• About SEZs: The Special Economic Zones Act was passed in 2005 and came into force along with the SEZ Rules in 2006. 
• What is SEZs?: It is a territory within a country that is typically duty-free (Fiscal Concession) and has different business and commercial laws chiefly to encourage investment and create employment.
• Asia’s first EPZ (Export Processing Zones) was established in 1965 at Kandla, Gujarat.
• Major Incentives and Facilities Available to SEZ: Duty free import/domestic procurement, Exemption from various taxes, External commercial borrowing, Single window clearance etc.
• The Board of Approval is the apex body and is headed by the Secretary, Department of Commerce (Ministry of Commerce and Industry).
• The Baba Kalyani led committee was constituted to study the existing SEZ policy of India and had submitted its recommendations in November 2018.
• Key changes in recent SEZ rules:

o Reduction in Land Requirement: The minimum land requirement slashed from 50 hectares to just 10 hectares.

o Easing of Encumbrance Norms: SEZs no longer need to have “encumbrance-free” land if the land is mortgaged or leased to Central/State governments or their agencies.

o Domestic Sales Permitted: Units in semiconductor and electronics SEZs are now allowed to sell in the Domestic Tariff Area (DTA) after paying applicable duties.

o Revised Net Foreign Exchange (NFE) Calculations: Goods received and supplied on a free-of-cost basis can now be included in NFE calculations and assessed using customs valuation rules.This is particularly helpful for industries like semiconductor manufacturing that often involve high-cost prototypes and design iterations.