India Eases SEZ Norms to Drive Local Semiconductor Manufacturing

An important action by the Ministry of Commerce and Industry (MOCI) is to update SEZ rules to quicken the growth of India’s semiconductor and electronics sector, address issues in the industry and bring policy in line with those used worldwide.

A major change is that now only 10 hectares of land is needed to establish a dedicated SEZ for semiconductor and electronics manufacturing, cut from the previous requirement of 50 hectares. As a result, it should help smaller companies enter the industry and create manufacturing centers throughout the region.

• SEZ land requirement cut from 50 to 10 hectares for chip and electronics units.
• “Free of Cost” items are included in Net Foreign Exchange for key components.
• SEZ goods are allowed in the Domestic Tariff Area with duties, and easier FTWZ transfers.

The revised SEZ rules apply to different parts like display module sub-assemblies, camera modules, battery packs, printed circuit boards, lithium-ion cells, as well as components for mobile devices, IT hardware, hearables and wearables which will help India grow its electronics value chain.

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The sector gets much-needed clarity on how to calculate Net Foreign Exchange from the new rules. In the past, products supplied “Free of Cost” were often not included which made calculating the exchange rate confusing. With the updated rules, “products that enter or leave the supply chain ‘Free of Cost’ will now be accounted for”—this should lead to better compliance and transparency for global companies.

Another advantage for industry is that, now, goods finished within SEZs can be sold in the Domestic Tariff Area (DTA), with their standard duties being applied. They also make it simpler to move goods into Free Trade and Warehousing Zones (FTWZs), so the logistics process is more flexible. By enforcing this policy shift, India is aiming to be a leader in semiconductor and electronics manufacturing across the globe.