Commerce Ministry Plans Overhaul to Boost SEZ-Domestic Market Transactions

The commerce ministry is seeking input from various departments on proposed measures to revive Special Economic Zones (SEZs) and facilitate business between SEZs and the domestic market. The ministry has suggested amendments to SEZ laws to allow the sale of SEZ products in the domestic market upon payment of duty on inputs.

The Commerce Ministry is actively seeking input from various departments on proposed measures to rejuvenate Special Economic Zones (SEZs) and streamline business transactions between SEZs and the domestic market, a senior official disclosed on Monday.

The ministry suggested permitting the sale of products manufactured in SEZs in the domestic market upon payment of duty foregone on inputs, which could potentially boost value addition.

The primary challenge with SEZs lies in the lack of economies of scale. The ministry emphasized the need to improve the connection between SEZs and the Domestic Tariff Area (DTA). Current regulations require SEZ units to sell their products in the DTA on a finished goods duty basis.

In addition to simplifying job work approval processes, the ministry has submitted a draft cabinet note proposing these changes. SEZs, currently treated as foreign territories for trade and customs duties, face restrictions on duty-free sales within the domestic market.

Last year, Commerce and Industry Minister Piyush Goyal indicated plans to ease certain SEZ restrictions to foster growth. The Global Trade Research Initiative (GTRI) supports this, suggesting adopting similar measures to the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme.

Data shows exports from SEZs rose over 4 per cent to USD 163.7 billion in fiscal 2024, despite a 3 per cent decline in the nation's overall exports. SEZs have been pivotal, comprising a significant portion of the country's exports.

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