Govt grants limited duty benefits for certain SEZs units for sale in domestic mkt

New Delhi, Apr 1 (PTI) The government has announced limited duty concessions to special economic zones (SEZs) for one year to help manufacturing units of these enclaves, hit by weak global demand, sell their goods in the domestic market.
    The measure takes effect from April 1 and will remain valid until March 31, 2027.
    As per the notification of the department of revenue, goods made in SEZs and sold in the domestic market will face slightly lower Basic Customs Duty (BCD), and in some cases reduced Agriculture Infrastructure and Development Cess (AIDC).
    The benefit covers a wide range of products—from chemicals and fertilizers to textiles, footwear, and machinery.
    However, the exemption will be available only if the unit in the SEZ had commenced production of goods on or before March 31, 2025, the notification dated March 31.
     They also have to prove that the goods in respect of which benefits of this exemption notification have been claimed, fulfil all the specified conditions.
     "This notification shall come into force with effect from the 1st day of April, 2026," it said.
     It added that the goods for which exemption under this notification is claimed should have been manufactured by the unit in the SEZ and should have undergone a minimum value addition of 20 per cent.
     In the recent budget, Finance Minister Niramala Sitharaman proposed a special one-time measure, to facilitate sales by eligible manufacturing units in SEZs to the Domestic Tariff Area (DTA) at concessional rates of duty. It was proposed to address the concerns arising about utilisation of capacities by manufacturing units in the SEZs due to global trade disruptions.
     It was a long-pending demand of these zones as they were not able to push exports of their excess production due to global uncertainties. Units in SEZs are allowed to sell their products in the DTA or domestic market on payment of import duties.
    The Finance Ministry said that customs duties have been rationalised, with 6.5 per cent duty to apply on certain goods currently attracting 7.5 per cent; 9 per cent on those at 10 per cent; and 10 per cent on notified items presently taxed at 12.5 per cent and 15 per cent.
    Further, 12.5 per cent duty will apply on notified products currently attracting 20 per cent, while specified items in the 20–30 per cent bracket will now face 15 per cent duty, and those in the 30–40 per cent range will attract 20 per cent duty.
     "In pursuance of the Union Budget 2026-27 announcement to address the concerns faced by the manufacturing units in the SEZs due to ongoing global trade disruptions, the Central Board of Indirect Taxes and Customs (CBIC) today introduced a special one-time relief measure to facilitate sales by eligible manufacturing units in SEZs to the DTA at concessional rates of duty," the ministry statement said.
     It added that the emphasis on exports by SEZ units shall remain and DTA sales at concessional rates by the eligible SEZ units shall not be more than 30 per cent of the highest annual FOB (free on board) value of exports in any of three immediately preceding financial years.
    Commenting on the decision, think tank GTRI said the scheme comes with strict conditions.
    GTRI Founder Ajay Srivastava said the exclusion of petrol and diesel weakens the policy, particularly for refinery-linked SEZs.
     "If the objective is to boost domestic supply, stronger measures such as restricting exports of petrol, diesel and ATF, as practiced by countries like
China and Singapore may be needed," Srivastava said.
     Krishan Arora, Partner and Leader, Indirect tax and India Investment Advisory, Grant Thornton Bharat, said the concessional duty ranges from 6.5 per cent to 12.5 per cent across sectors, with reduction in both BCD and AIDC, varying from product to product.
    "For now the benefit is for 2026-27, but given the uncertain times - this may need to be relooked for extension for another year or so," he said adding this relaxation provides cushion to the industry from inevitable outside shocks, permitting these units to smoothly shift towards the domestic market and resolving undercapacity challenges.
    These zones are treated as foreign territories for laws pertaining to customs (trade and import duties), with restrictions on duty-free domestic sales.
    Companies operating within SEZs are allowed to import materials and components duty-free, with the condition that the finished goods produced are meant to be exported out of India. They can sell in the Indian domestic market on payment of applicable duties on the output.
    Total exports from these zones rose 7.37 per cent to USD 172.27 billion in 2024-25. There are 276 operational SEZs, with 6,279 units, in the country.

(This story has not been edited by THE WEEK and is auto-generated from PTI)