The Government of India is in the process of revising rules for Special Economic Zones (SEZs) to allow exporters easier access to the domestic market.
A panel comprising officials from the Ministry of Commerce & Industry, NITI Aayog, and representatives of exporters is working on a new framework aimed at improving the flexibility and competitiveness of SEZ-based businesses. This move comes amid rising global trade challenges, particularly the higher tariffs imposed by the United States on Indian goods, which have affected many export-oriented SEZ units that rely heavily on the US market.
During FY25, exports from India’s SEZs stood at around US $172 billion across nearly 276 operational units, but domestic sales accounted for only about 2 % of their total output.
To address this imbalance, one of the key proposals under discussion is the introduction of “Reverse Job Work”, which would allow SEZ units to undertake manufacturing or processing work for Domestic Tariff Area (DTA) companies. This measure is expected to help optimize manpower and machinery when export demand slows down, improving efficiency and resource utilization within SEZs.
However, policymakers are debating the issue of duty exemption on inputs used for such domestic market work. Since SEZ units currently import raw materials duty-free, extending this advantage to domestic operations could create an uneven playing field against local manufacturers who pay duties.
The Ministry of Finance has therefore expressed concerns over revenue implications and is examining ways to ensure fair competition between SEZ and non-SEZ producers.
The gems and jewellery sector, which contributes nearly 65 % of India’s studded jewellery exports from SEZs, is among the hardest hit by global tariff pressures. Industry stakeholders believe that relaxing SEZ restrictions on domestic sales could provide much-needed relief to such export-driven industries.
Instead of waiting for a complete overhaul of the SEZ Act, the government is exploring faster regulatory measures to implement these changes. The Commerce Ministry is expected to finalize the draft policy proposal after consultations with key departments and exporters.
Experts say that once implemented, the new SEZ norms could revitalize India’s export ecosystem, bridging the gap between global and domestic markets, enhancing industrial productivity, and supporting the country’s broader goal of economic self-reliance.
