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SEZ reforms: enhancing India’s competitiveness in IT–ITES exports
SEZ reforms: enhancing India’s competitiveness in IT–ITES exports

September 1, 2025

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Special Economic Zones (SEZs) remain central to India’s export-led growth strategy. They account for more than a third of total exports, with IT–ITES alone contributing an estimated USD 70–80 billion annually from SEZs — over half of all services exports from these zones. As tax holidays have been phased out, the focus must now shift to regulatory flexibility and operational ease so SEZs continue to serve as a strong platform for India’s global services delivery model.

This note consolidates nine priority reforms that can reduce compliance friction and strengthen SEZ competitiveness for IT–ITES exporters:

  • Indian rupee billing for DTA services: Expressly allow billing in INR for supplies to the domestic tariff area, in line with the treatment of goods, while clarifying how such transactions count towards NFE.
  • Depreciation on second-hand IT assets: Ensure duty is levied only on depreciated value when assets are moved to the DTA, without requiring separate third-party valuation.
  • Input tax credit on employee welfare: Recognise facilities such as cafeterias, crèches, and gyms as authorised operations so related inputs qualify for ITC.
  • Inter-SEZ transfers: Replace prior approvals with a digital intimation system, enabling smoother redeployment of IT assets across units.
  • DSPF simplification: Move from invoice-wise endorsement to one-time supplier approval, integrate SEZ Online with GSTN, and resolve technical bottlenecks that delay refunds.
  • Broad-basing of LoAs: Permit merger of Letters of Approval across SEZ units of the same entity within a state, reducing duplication and easing asset and workforce movement.
  • Networking equipment depreciation: Reclassify routers, switches, and related devices as computer peripherals to allow faster depreciation, reflecting actual technology cycles.
  • Partial debonding depreciation: Clarify that plant and machinery such as DG sets, HVAC systems, and sewage treatment plants qualify for depreciation during partial debonding, ensuring parity with full de-notification. While developers are directly affected, costs ultimately flow to IT–ITES occupiers, and those firms operating their own campuses face the issue directly.
  • Employee identity cards: The current SEZ-issued physical ID card system has become resource-intensive for large IT–ITES workforces, requiring manual stamping, renewal, and surrender. A modernised approach would ease the burden while maintaining security.

Individually, these measures address specific bottlenecks; taken together, they can help modernise the SEZ framework. A detailed paper is attached.

As with GST reforms, SEZ reforms are not about piecemeal fixes but about structural alignment with global practice. By reducing compliance friction and enhancing operational flexibility, SEZs can continue to anchor India’s services export growth and reinforce the country’s position as a trusted partner in the global digital economy.

We will continue to spotlight other key themes in this series that are central to sustaining high-quality employment and India’s global trade competitiveness.


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Nasscom-PP-SEZ-01-2025_Ease-of-Doing-Business_SEZ-Paper-I_Attractiveness-IT-ITES.pdf

ashish.aggarwal



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