The government has set up a 17-member committee to overhaul the Special Economic Zone (SEZ) framework and to prepare a roadmap for reforms. The panel includes representatives of the Department of Commerce, the Department for Promotion of Industry and Internal Trade, Niti Aayog and the Central Board of Indirect Taxes and Customs. It will study harmonisation of export promotion schemes with SEZs, including export oriented units, Manufacturing and Other Operations in Warehouse, Advance Authorisation, Export Promotion Capital Goods and Duty Free Import Authorisation.

Its terms of reference require an assessment of the SEZ Act of 2005 to judge its effectiveness in the current global trade and investment environment and to identify policy distortions. The committee will evaluate the impact of recent and proposed reforms, including measures related to Domestic Tariff Area (DTA) sales, fiscal and non-fiscal incentives, compliance requirements and operational flexibilities. The mandate also covers whether harmonisation with other schemes can reduce policy fragmentation.

The panel will examine the effectiveness of SEZs in attracting domestic and foreign investment and in promoting manufacturing, services, technology upgradation, value addition and employment for micro, small and medium enterprises. It will identify operational, procedural and regulatory challenges faced by developers and units, including customs, taxation, compliance burden, infrastructure and coordination among stakeholders. Recommendations are expected to focus on reducing compliance costs and improving operational flexibility.

The SEZ Act saw a halt in new approvals after certain tax advantages were withdrawn and efforts to replace the law have been intermittent since 2022 when the Development of Enterprises and Service Hubs Bill was proposed. After consultations the Bill was set aside in favour of smaller amendments and no replacement has been placed before Parliament. The finance minister relaxed rules in the current budget to permit DTA sales to assist exporters facing 50 per cent reciprocal tariffs from the United States, but the relaxation remains to be notified and recent trade developments have altered the policy context.