New Delhi, April 1 – The government has announced limited duty concessions for special economic zones (SEZs) for one year to help manufacturing units within these zones, which are facing weak global demand, sell their goods in the domestic market.
This measure will take effect from April 1 and remain in effect until March 31, 2027.
According to a notification from the Department of Revenue, goods manufactured 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).
This benefit covers a wide range of products, including chemicals, fertilizers, textiles, footwear, and machinery.
However, the exemption will only apply if the unit in the SEZ started producing goods on or before March 31, 2025.
They must also demonstrate that the goods for which this exemption is claimed meet all the specified conditions.
The notification states: "This notification shall come into force with effect from April 1, 2026."
It further clarifies that the goods for which exemption is claimed must be manufactured by the unit in the SEZ and must have a minimum value addition of 20%.
In the recent budget, Finance Minister Nirmala Sitharaman proposed a special, one-time measure to facilitate sales by eligible manufacturing units in SEZs to the Domestic Tariff Area (DTA) at concessional duty rates. This was aimed at addressing concerns regarding the utilization of capacity by manufacturing units in SEZs due to global trade disruptions.
This had been a long-standing demand for these zones, as they were unable to export their excess production due to global uncertainties. Units in SEZs are allowed to sell their products in the DTA or domestic market by paying import duties.
The Finance Ministry stated that customs duties have been rationalized, with a 6.5% duty now applying to goods that previously had a 7.5% duty; 9% for goods previously taxed at 10%; and 10% for goods currently taxed at 12.5% and 15%.
Furthermore, a 12.5% duty will now apply to goods that previously had a 20% duty, while goods in the 20-30% range will now face a 15% duty, and those in the 30-40% range will have a 20% duty.
"In pursuance of the Union Budget 2026-27 announcement to address the concerns faced by manufacturing units in 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 will remain, and DTA sales at concessional rates by eligible SEZ units will not exceed 30% of the highest annual FOB (Free on Board) value of exports in any of the 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% to 12.5% across sectors, with reductions 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 re-evaluated for an extension of another year or so," he said, adding that this relaxation provides a cushion to the industry from inevitable external shocks, allowing these units to smoothly transition to the domestic market and resolve under-capacity 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 intended for export out of India. They can sell in the Indian domestic market by paying applicable duties on the output.
Total exports from these zones rose by 7.37% to USD 172.27 billion in 2024-25. There are 276 operational SEZs, with 6,279 units, in the country.