Govt Amends SEZ Rules to Boost Semiconductor, Electronics Sector

In a significant move to boost the semiconductor and electronic component manufacturing in the country the government of India has liberalised the Special Economic Zones (SEZ) rules. 

The government of India has so far approved six proposals to set up semiconductor plants in India. 

Recently, the central government approved the proposal of Taiwanese company Foxconn and HCL of India to jointly set up a semiconductor plant near Jewar International Airport in the Yamuna Expressway Industrial Development Agency in Uttar Pradesh. 

The Semiconductor Mission, launched by the government of India in December 2022 to make India a hub of semiconductor and electronic manufacturing in the world.

Changes made in the SEZ 

• The minimum contiguous land area for setting up for the manufacturing of semiconductors or electronic components has been reduced from 50 hectares to 10 hectares.
• The Board of Approval under the Union Ministry of Commerce and Industry can relax the condition requiring SEZ land to be encumbrance-free in cases where it is mortgaged or leased to the Central / State Government or their authorised agencies.
• The value of goods received and supplied on a free-of-cost basis is to be included in Net Foreign Exchange calculations and assessed using applicable customs valuation rules.
• These units can sell their products in the domestic tariff areas (within India)after payment of applicable taxes and duties.

About Special Economic Zones 

The concept of Special Economic Zones (SEZs) has been inspired by China.

It is a special area within India that has been set up to attract foreign and domestic investment and boost exports from the country. 

The government provides tax and other concessions to the developer of the SEZ and units set up in the SEZ. 

The  Export Import (EXIM) policy of 1997-2002 introduced SEZ in India.

It was implemented nationwide from 1 April 2000, and the Kandla, Santacruz, Cochin, and Surat export processing zones (EPZs) were converted into SEZS.

Later, Parliament enacted the Special Economic Zone Act in 2005, and the central government notified the SEZ Act 2005 and the SEZ rule 2006 on 10 February 2026.

Role of the Board of Approval

• The Board of Approval under the Union Ministry of Commerce and Industry is the apex body that approves SEZ proposals in the country.
• SEZ can be set up by the central government ,state government ,private sector or  jointly by the government and the private sector.
• Companies set up their units in these approved SEZs.

Foreign Territory for Trade Purposes

The SEZ is considered a foreign territory for trade purposes.

• The Customs Acts 1962 are not applicable to units based in SEZS, and all imports are based on self-certification.
• The SEZ is distinguished from the rest of the country, which is called a domestic tariff area (DTA).
• Thus, if a unit in an SEZ buys goods and services from domestic tariff areas, then this is considered an import for the SEZ unit.
• If the SEZ unit sells its goods and services to the companies in domestic tariff areas then it is considered as export for the SEZ unit.

Net Foreign Exchange Earner  

• The units located in SEZ have to become a net exporter within five years of their operation.
• These units can sell a limited amount of goods and services to the DTA units and it is counted as export.

Land Area Requirement for SEZ 

• The minimum contiguous land area requirement for SEZ is 50 hectares.
• The maximum land area on which an SEZ can be set up is 5,000 hectares.
• There is no minimum land area requirement for SEZS dedicated to information technology or information technology-enabled services, biotech, or health (other than hospital) services.
• SEZ for semiconductors and electronic component manufacturing, the minimum land requirement is 10 hectares.
• The minimum land requirement for an SEZ to be set up in Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttarakhand, Sikkim, Goa, or a Union territory is twenty-five hectares.

Also Read:  Country’s Sixth Semiconductor Plant to set up in Jewar, Uttar Pradesh