SEZ rules eased for merger of units, minimum area requirement

New Delhi: The government has amended the rules governing special economic zones (SEZ) to align them with the goods and services tax (GST).

The new rules permit merger of units in the same zone and do away with the minimum area requirement to set up biotechnology and health SEZs.

SEZ units can now export prohibited goods as long as the goods used for manufacture are imported.


The new rules have also simplified the procedure for claiming drawbacks. Instead of the earlier requirement of submitting the ARE-1 or application for removal of excisable goods for export by air, sea, post, land form to claim refund, exporters now need to submit only the bill of export.

“By recent amendments, the SEZ procedures have been aligned with the GST, so that there is no gap between the two statutes,” said Bipin Sapra, partner, EY.

The amendments exclude income from supplies made to area outside the zone from the net foreign exchange earnings (NFE). Trading income from services rendered in domestic tariff area (DTA) would not be counted for NFE. The change in method of computing NFE is aimed at boosting manufacturing and services for exports.

The amended rules have incorporated provisions relating to allowing employees of IT and ITeS units in SEZs to work from home or place outside SEZ unit.

Another expert, who did not want to be identified, said the nature of amendments seems to suggest that SEZs are purely export zones and that excluding income from DTA activity from the computation of NFE is a retrograde step.