Govt’s SEZ overhaul may offer relief to gems and jewellery sector facing tariff pressures

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The Union government’s proposed overhaul of India’s Special Economic Zone (SEZ) framework is expected to give a boost to the gems and jewellery sector, one of the country’s largest export industries and currently under pressure after US tariff measures led to a sharp fall in shipments.

A government panel — comprising officials from the ministries of commerce and finance, NITI Aayog and key exporter bodies — is drawing up new norms to strengthen SEZs by improving their linkages with the domestic market and making them more resilient to global fluctuations.

Special Economic Zones (SEZs) are designated export hubs that operate under separate regulatory and tax frameworks to encourage manufacturing for global markets.

According to officials privy to the matter, the panel is examining changes that would make it easier for SEZ units to operate during periods of weak export demand. These include allowing SEZ units to sell more easily into the domestic tariff area (DTA) on favourable duty terms and permitting “reverse job work” so units can take on domestic processing when export orders fall. The panel is also looking at simplifying rules to let companies shift between export and domestic operations without cumbersome procedures.

Kirit Bhansali, chairman of the Gem and Jewellery Export Promotion Council (GJEPC) told Moneycontrol that the proposed reforms would directly support units operating in SEZs, which produce approximately 65 percent of India’s studded jewellery exports.

"These SEZ units are hit hardest when export demand weakens, because the existing rules prevent them from using their capacity for domestic work," he said.

"If the government allows reverse job work, limited sales to the DTA, and smoother movement between export and domestic operations, it will help manufacturers retain skilled workers, manage inventory more efficiently and stay competitive despite the tariff-related slowdown," Bhansali said.

The sector has been sharply affected by the recent tariff measures imposed by the United States, its largest export market. Between April and September 2025, India’s total gem and jewellery exports to the US fell 40.28 percent to $2,770.66 million, while exports of cut and polished diamonds declined even more steeply, dropping 53.62 percent to $1,175.09 million.

Industry representatives say the higher duties have led to a direct cut in order volumes and created uncertainty in pricing and inventory cycles, putting additional pressure on manufacturers who are already coping with weak global demand.

Bhansali added that broader SEZ reforms would also help strengthen the industry’s long-term efficiency by improving logistics, reducing compliance costs and enabling faster movement of goods across borders.

“We need SEZs to function as seamless export hubs with clearer rules, quicker clearances and better integration with global supply chains. Measures such as rationalising documentation requirements, improving digital processing systems and expanding permissible sourcing routes would give manufacturers greater predictability,” Bhansali said, adding that these steps will not only help the industry navigate the current downturn but also prepare it for future growth as new markets open up.

He said the industry is simultaneously working to diversify its export base, with companies exploring opportunities in Latin America, Saudi Arabia, Cambodia and Vietnam, while strengthening trade ties with free-trade-agreement partners such as the UAE and Australia.