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Special Economic Zones (SEZs)

Legal Framework and Policy Architecture

A Special Economic Zone is a geographically defined area within which goods, services, and investment operate under rules more liberal than those prevailing in the rest of the country (the "Domestic Tariff Area" or DTA). In India, SEZs are governed by the Special Economic Zones Act, 2005, which came into force on February 10, 2006, and the SEZ Rules 2006.

Key details

India's SEZ history begins with Asia's first Export Processing Zone (EPZ), established at Kandla, Gujarat in 1965.
The SEZ Policy was announced in April 2000 to overcome limitations of EPZs (multiplicity of controls, poor infrastructure, unstable fiscal regime).
The SEZ Act 2005 received Presidential assent on June 23, 2005; came into force February 10, 2006.
The Act provides for: duty-free import/procurement of goods; no import licensing requirements; single-window clearance through the Board of Approval (BoA); fiscal incentives for developers and units; simplified procedures.
SEZ units are treated as "foreign territory" for trade and tariff purposes — goods moving from the DTA into an SEZ are treated as exports, and from an SEZ into the DTA as imports (subject to applicable duties).
Mandatory requirement: SEZ units must demonstrate Positive Net Foreign Exchange Earnings (PNFE) cumulatively over five years from the start of production.
Board of Approval (BoA), chaired by the DPIIT Secretary, is the apex body for SEZ governance.
As of February 28, 2026: 368 notified SEZs; 280 operational SEZs in India.
SEZ exports: ₹11.70 lakh crore (through December 2025-26), up 32.02% year-on-year.
SEZs account for approximately 38% of India's total goods exports (up from 6% in FY06).
Employment in SEZs: over 31.73 lakh persons (as of December 2025).