Government extends special one time relief measure for SEZs

New Delhi: The government has announced a one-time special relief measure in the form of certain duty benefits for special economic zones (SEZs), a move which would provide support to units in these enclaves amid global uncertainties.

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 department of revenue has said in a 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.

She stated that the quantity of such sales will be limited to a prescribed proportion of their exports.

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 Domestic Tariff Area (DTA or domestic market) on payment of import duties.

Commenting on the decision, 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 (basic customs duty) and Agriculture Infrastructure and Development Cess (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.

At the same time, domestic industry also benefits by exploiting available capacity of SEZ and will have reduced reliance on imports which are getting both delayed and expensive, owing to the war era global economy is currently grappling with, he added.

On February 1, Commerce and Industry Minister Piyush Goyal said that several of the units have spared capacity and the announcement will help them sell in the domestic market at concessional duty, thereby reducing imports.

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.