On 1st January 2024, the Directorate General of Foreign Trade (“DGFT”) under the Ministry of Commerce and Industry issued a notification (“Notification 56/2023”), amending Paragraph 2.31 (under Chapter 2) of the Foreign Trade Policy 2023 (“FTP 2023”), which deals with import policy for second-hand goods. Notification 56/2023 inserts Paragraph 2.31 [I (e)] to provide relaxations for importing used Information Technology (“IT”) assets/goods like laptops, desktops, monitors, and printers from Special Economic Zones (“SEZs”) to Domestic Tariff Areas (“DTAs”), subject to the fulfilment of conditions stipulated therein.
Generally, the import of goods/services is subject to certain restrictions. These restrictions are divided into four categories, namely –
- Restricted – import/export of goods/services allowed only upon obtaining authorization from the DGFT,
- Exclusive trading through State Trading Enterprises (“STEs”) – export/import of goods/services through STEs subject to conditions laid out in the Foreign Trade Policy,
- Free – import/export of goods/services which do not require any authorization from the DGFT, and
- Prohibited – import/export of goods/services not permitted.
Since SEZs are designated areas within a country that are deemed to be foreign territory for the purposes of trade operations, duties, and tariffs, transferring goods from the SEZ to the DTA is essentially equivalent to importing them into the country.
With this background, the Notification 56/2023 states that the import of used IT assets from SEZ to DTA falls under the “restricted” category and would be subject to a ‘License for Restricted Import’. However, the movement of used IT assets would be free i.e. without requiring a licence for restricted imports, subject to the following conditions:
- Further use for DTA operations – The used IT assets may be transferred for the purpose of further use in DTA operations. Further, such transferred IT assets must have been used for a minimum period of 2 years in the SEZ and must not be older than 5 years from their date of manufacturing.
- Re-location of a unit to DTA – In case a unit of a company closes its operation in SEZ and re-locates to DTA, then the transfer of such assets will not require a licence for restricted imports provided that the used IT assets of the unit are not older than 5 years from their date of manufacturing. However, if the IT assets entered the SEZ area in second-hand/used/old condition and have been used for less than 2 years then such used IT assets cannot be transferred to DTA without a licence.
- No exemption from regulatory requirements availed at the time of import – If at the time of importing the used IT assets into SEZ, any exemption from regulatory requirements i.e. Compulsory Registration Order (CRO), Restriction of Hazardous Substances (RoHS), and WPC (Wireless Planning and Coordination) was availed, then such used IT assets will not be covered under these relaxations.
Earlier, a company in DTA needed a licence for importing used IT assets from SEZs. By amending the FTP 2023 vis-à-vis used IT assets, the DGFT has eased the cumbersome process of obtaining authorization/licences upon fulfilment of the above noted conditions, thereby allowing seamless transfer of used IT assets from SEZ to DTA and facilitating ease in doing business in India.
Having said that, companies that wish to transfer used IT assets to DTAs, must comply with the conditions stipulated in Notification 56/2023 in order to avail the benefits of the amendment and to import used IT assets without obtaining a license from the DGFT.