The Central government has allowed partial and floor-wise denotification of SEZs through a key amendment to SEZ Rules, 2006. This non-processing area can be utilised to set up operations of businesses engaged in IT and ITeS. However, the non-processing area will consist of a complete floor and part of a floor will not be allowed to be demarcated, as per a notification issued by the Department of Commerce on 06 December, 2023.

In a relief to owners and operators of office parks across the country, developers can lease the non-processing area to IT companies not involved in export activity and reduce the vacancy levels at their office complexes.

As per the Special Economic Zones (Fifth Amendment) Rules, 2023, demarcation of part of the built-up area of the SEZ as non-processing area may be allowed, on request of a developer of an IT or IT-enabled services SEZs. The board of approval will allow demarcation only after repayment, without interest, of tax benefits attributable to the non-processing area, social and commercial infrastructure for both processing and the proposed demarcated area.

Demarcation of non-processing area will not be allowed if it results in decreasing the processing area to less than 50 percent of the total area or less than 50,000 sq. mtrs., 25,000 sq. mtrs. and 15,000 sq. mtrs. in category A, B, and C, respectively.

Apart from the expansion of companies’ office spaces, the benefits of SEZ areas will also be extended to non-SEZ entities and is expected to unlock vacant spaces in operational SEZs, with the revised policy.