Business plans change. A unit may wish to relocate to the DTA, close down, merge or sell its operations. Leaving an SEZ is a regulated process, and doing it badly can leave the promoters with duty liabilities, penalties and lease disputes long after the unit has stopped operating.

Two routes to exit

An SEZ unit can exit either under Rule 74 (debonding, i.e. opting out of the SEZ scheme) or under Rule 74A (transfer of assets and liabilities to another entity).

Rule 74: opting out of the SEZ scheme

The unit applies to the Development Commissioner, who first issues an in-principle permission and, after documents and clearances are received, a final exit order. The main elements are:

• payment of applicable duties on capital goods, raw material, components and finished stock remaining with the unit, with depreciation allowed for capital goods as per the Rules;
• payment of any penalty imposed by the competent authority (where an appeal is pending, exit may still be considered on conditions);
• settlement of obligations under the Foreign Trade (Development and Regulation) Act, 1992, if export obligations or NFE are unmet;
• execution of a legal undertaking in Form L;
• no-dues certificates from the Development Commissioner's office, Customs and the developer or zone authority.

Rule 74A: transfer of assets and liabilities

A unit that has held a valid LoA and lease for at least five years, and has been in operation for at least two years, may transfer its assets and liabilities to another person, including by sale. The Approval Committee must approve; the transferee must satisfy all eligibility criteria for a unit, and the applicable duties and export obligations of the transferor stand transferred to the transferee. The developer's no-objection is usually needed too.

Alternate method for transfer of space

The Department of Commerce has issued an instruction providing an alternate method of transferring space of an exiting unit to an eligible incoming unit, including a time-bound e-auction process. The exiting unit remains liable for any liability relating to its own period of operation.

Where disputes usually arise

• Valuation of assets and stock for duty;
• Developer's claim for rent arrears, interest and restoration costs when the unit leaves;
• Pending show-cause notices or adjudication that block the exit order;
• Employee dues and statutory liabilities on closure.

Practical tips

Start a reconciliation of NFE, BLUT, duty-free imports and stock at least six months before the intended exit. Clear lease dues first, because developers can withhold no-dues certificates. Keep the board resolutions, valuer's report and customs records ready. Where rent arrears or eviction notices are already involved, take legal advice early so that the exit process and the lease dispute are handled together.

Need Guidance? Contact KC LEGAL

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This article is for general information only and is not legal advice. Law and procedure change; please verify the current position for your specific case. Last reviewed: November 2026.