India Relaxes SEZ Rules to Boost Semiconductor, Electronics Output

• Land requirement for semiconductor SEZs cut from 50 to 10 hectares.
• "Free of Cost" goods now count in Net Foreign Exchange calculations.
• Finished products can be supplied domestically or moved between SEZs with duties.

MOCI has amended the Special Economic Zone rules with a view to spurring semiconductor and electronics manufacturing in India. In this respect, the key amendment is to allow a reduction of the minimum contiguous land requirement for setting up an SEZ meant for semiconductor and electronics production from 50 hectares to 10 hectares, thereby easing the ability of companies to establish operations.

These relaxations cover a wider spectrum of products, including display module subassemblies, camera modules, battery packs, printed circuit boards, lithium-ion cells and materials used in Mobile Devices, IT Hardware, Hearables, and Wearables, intending to boost investment and growth in semiconductor and electronics.

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One major amendment is to the calculation of Net Foreign Exchange (NFE), one of the vital eligibility parameters for claiming benefits in an SEZ. Goods received or supplied "Free of Cost" were primarily not taken into account while computing NFE, whereas now this has been duly clarified to include such goods in the NFE calculations, thereby providing a better picture of Foreign Exchange earnings, which becomes important given the complicated value chains of semiconductor manufacturing.

Further relaxed rules of SEZ also provide for finished products manufactured in the SEZs to be supplied into the DTA against payment of applicable duties. Moreover, finished goods can also be moved into free trade and warehousing zones either within the same SEZ or in a different one, thus providing more flexibility to logistics and distribution. These changes collectively aim to strengthen India’s position as a competitive hub for semiconductor and electronics manufacturing.