New Delhi, April 1 The government's decision to provide limited duty concessions to manufacturing units in special economic zones (SEZs) for selling goods in the domestic market is a one-time relief measure, not a permanent policy change, according to sources in the finance ministry on Wednesday.
The focus of these zones remains and will continue to be on exports, they said.
The government has provided duty concessions to SEZ manufacturing units for one year, until March 2027, for the sale of notified goods in the domestic market to help them overcome global economic uncertainties.
"This is a one-time, time-bound relief, and is strictly a targeted, short-term intervention announced to address immediate constraints faced by SEZ units. It is not a permanent shift in policy. This is not a sweeping overhaul of the SEZ framework," the sources said.
At the same time, the design of the measure is structured, rule-based, and supported by multiple safeguards. The introduction of export-linked caps – especially the allowance of up to 30 per cent of export turnover for domestic sale – creates a measurable and controlled gateway, they added.
Furthermore, the inclusion of minimum value addition requirements ensures that the focus remains on genuine manufacturing activity rather than low-value trading.
Sectoral exclusions reflect a conscious effort to protect sensitive domestic industries, while the concessional duty rates have been determined to maintain a level playing field with the DTA (domestic tariff area) units, they added.
"This measure should be viewed strictly as a one-time relief, with no implied commitment toward institutionalisation or expansion into the domestic market," sources said.
By allowing SEZ units to sell up to 30 per cent of their export turnover in the domestic market, the one-time relief window introduces a calibrated and controlled flexibility that will ease the pressure faced by existing units in SEZ due to global trade disruptions.
This cap is critical as it ensures that SEZs remain primarily export-focused, while still providing a meaningful buffer against global demand shocks.
By giving SEZs the ability to tap into domestic demand at concessional rates of customs duty, it ensures that factories can run closer to optimal capacity even during export downturns.
"The relief is primarily driven by immediate external challenges rather than a long-term policy shift. The backdrop is clearly one of global trade uncertainty, geopolitical disruptions, and weakening export demand, all of which have placed pressure on the capacities of the existing SEZ units that are dependent on international markets," they said.
Addressing concerns from certain quarters that the move may put domestic manufacturers at a disadvantage, sources said the duty is not meant to give SEZ units an advantage and instead, it is based on the idea of equalisation, that is, to adjust for the benefits SEZ units already enjoy.
"Even if the rate looks lower on paper, it is calibrated to broadly neutralise their cost advantage, so that goods entering the domestic market are not unfairly priced," they said, adding that certain sensitive sectors, especially where domestic industry needs protection or where tariffs are already low, are kept outside the relief measure.