The government on Sunday announced that one-time measure to allow special economic zone units to sell their goods in the domestic market at concessional import duty rates, subject to certain quantitative restrictions.
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.
At present, units in SEZs are allowed to sell their products in the Domestic Tariff Area (DTA or domestic market) on payment of import duties.
“To address concerns arising about utilisation of capacities by manufacturing units in the SEZs due to global trade disruptions, I propose, as a special one-time measure, to facilitate sales by eligible manufacturing units in SEZs to the DTA at concessional rates of duty,” Finance Minister Nirmala Sitharaman said in her Budget speech.
The quantity of such sales will be limited to a prescribed proportion of their exports, she said.
Necessary regulatory changes will be undertaken to operationalise these measures while ensuring a level-playing field for units working outside these zones.
Explaining the issue, Commerce and Industry Minister Piyush Goyal said several of the units have spared capacity and the announcement will help them sell in domestic market at concessional duty, thereby reducing imports.
“If we use that excess capacity in the domestic market, then these goods would be available in India at competitive prices,” Goyal told PTI in an interview.
The move would help cut imports from countries like Vietnam. Under a free trade agreement with Asean group, Vietnam goods enter India duty-free.
He said the units will be allowed to sell a certain portion of their production and pre-dominace will continue to be for exports.
The would get some “rebate on the duty that they have to pay so that the sales in the domestic market can replace some of the imports that is coming from abroad and provide opportunities for excess capacities to service the domestic market”, he added.
The commerce minister said in the next 1-2 months, details of this announcement will be rolled out.
However, he said, “We will keep in mind that domestic industry should not suffer from this… we may keep some sectors out of this such as oil refineries may not be included in that for domestic sale”.
What Are SEZs
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.
SEZ developers and units had received tax benefits. Domestic industries had opposed the proposal, arguing that allowing sales in the domestic market would put them at a disadvantage, as SEZs have already enjoyed tax concessions.
Total exports from these zones rose 7.37% to $172.27 billion in 2024-25.
There are 276 operational SEZs, with 6,279 units, in the country.
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