India’s latest budget proposes a special one-time measure allowing eligible manufacturing units in Special Economic Zones to sell goods in the Domestic Tariff Area at concessional duty rates, responding to global trade volatility and US tariffs.
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BIJOY GHOSH
Responding to long-standing industry demands amid global trade volatility and US tariffs, Finance Minister Nirmala Sitharaman has proposed a special one-time measure allowing SEZ manufacturing units to sell goods in the Domestic Tariff Area (DTA) at concessional duty rates. While the move aims to mop up excess capacity, the industry is cautious as critical details on eligibility and sales caps are to be clarified.
“To address the 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,” Sitharaman said in her budget speech on Sunday.
The quantity of such sales will be limited to a prescribed proportion of their exports, she said.
Level Playing Field
Further, the FM added that steps will also be taken to ensure a level playing field for units operating outside the SEZs in the DTA (domestic market) .“Necessary regulatory changes will be undertaken to operationalise these measures while ensuring a level playing field for the units working in the DTA,” she said.
SEZs are enthusiastic about the announcement but are waiting for the fine print. “..grateful to the government for recognising the need for enabling concessional customs duty on supply of goods to the Domestic Tariff Area. This will enable better utilisation of capacities in SEZs. It will also enable SEZ units to supply world class products to the Indian market rather than importing the same,” said Alok Chaturvedi, Director General, Export Promotion Council for EOUs and SEZs.
Import Substitution
This will also help in import substitution, create employment opportunities in the SEZs and may facilitate more investments, he added.
The industry is awaiting more details. “Details on the eligible manufacturing units, the concessional rate of duty, the cap on quantity of sale as proportion of exports and the meaning of level playing field for DTA manufacturers are awaited,” Chaturvedi said.
SEZs have long demanded that units should be allowed to sell in the DTA on a `duty foregone’ basis to bring down the burden of duties. That would mean their duty payable should be based on the duty on the raw materials used to manufacture those goods, not on customs duties on the final product.
Other Proposals
In their budget demand, SEZs also proposed introducing reverse job-work (permitting SEZ units to perform production or processing tasks for the DTA or the local market) and allowing INR payments for services provided by SEZs to domestic units.
The budget, however, has responded to just one demand. The rest may be part of the SEZ Amendment Bill that the Commerce Department has been working on. Total exports from SEZs stood at $176.6 billion in 2024-25.
Published on February 1, 2026