Govt allows temporary customs duty relief for SEZ units sold domestically
New Delhi, Apr 1, 2026
One-year relief aims to boost SEZ manufacturing by allowing eligible units to utilise idle capacity in the domestic market amid global export volatility
The government has announced one-time relief measure for units operating in special economic zones (SEZ), allowing them to sell goods at a lower customs duty for a one-year period, amid ongoing geopolitical uncertainty.
The concessional tariff is expected to help exporters deal with the ongoing geopolitical uncertainties and enable units in SEZs to utilize idle capacity, amid an unpredictable export market.
The measure will be effective from 1 April 2026 to 31 March 2027 and will cover several product categories, such as plastics, textile, chemicals, electronics, among others, according to a finance ministry notification. Sectors such as gems and jewellery and petrol and diesel products are excluded from the list of product categories.
The lower duty is restricted to units that started production on or before 31 March, 2025. At least 20 per cent value addition needs to be ensured and there will be a need to limit domestic sales to 30 per cent of the units’ highest export value in the past three years. “This exemption shall be available only if the unit in the SEZ had commenced production of goods on or before the 31st day of March, 2025, and and proves to the satisfaction of the proper officer, that the goods in respect of which benefits of this exemption notification have been claimed, fulfil all the conditions specified in the Annexure to this notification,” the notification dated 31 March said. However, the benefits won’t apply to the units operating in Free Trade Warehousing Zones.
The reduced duties range from 5 per cent to 12.5 per cent. Till now, SEZs paid full customs duty, in case a finished product is sold to the rest of the country. In some cases, Agriculture Infrastructure and Development Cess (AIDC) has also been reduced.
The announcement came after finance minister Nirmala Sitharaman during the Budget Speech said that the government will soon introduce a one-time measure to allow eligible manufacturing units in SEZs to sell their goods in the domestic market at a ‘concessional duty’. “To address the concerns arising about utilization of capacities by manufacturing units in the Special Economic Zones due to global trade disruptions, I propose, as 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,” Sitharaman said in the Budget speech.
That apart, there also has been long-standing demand from the department of commerce to allow the sale of products manufactured in SEZs to the domestic market but on a ‘duty foregone basis’ on raw materials, instead of the finished product.
Delhi-based think tank GTRI said that the impact of the measure is likely to be modest. The duty cut is small—around 1 percentage point for many products. The absence of any relief on IGST further limits incentive.
“In addition, the requirement of at least 20 per cent value addition and the cap of 30 per cent on domestic sales restrict flexibility for SEZ firms. The exclusion of petrol and diesel further 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,” the GTRI report said.
[The Business Standard]
