Government Permits Special Economic Zone Units to Sell Goods in Domestic Market at Concessional Duty Rates

The government has introduced a one-time initiative allowing Special Economic Zone (SEZ) units to sell goods in the domestic market at reduced import duty rates, subject to certain limits. This move addresses a long-standing request from SEZs, which faced challenges in exporting excess production due to global uncertainties. Currently, SEZ units can sell domestically by paying import duties.

Finance Minister Nirmala Sitharaman, during her Budget speech, proposed this measure to help SEZ manufacturing units utilise their capacities amid global trade disruptions. She stated that eligible SEZ units could sell to the Domestic Tariff Area (DTA) at concessional duty rates. However, the sales quantity will be capped at a specific proportion of their exports.

SEZ Units and Domestic Sales

Commerce and Industry Minister Piyush Goyal explained that many SEZ units have unused capacity. The new policy will enable them to sell domestically at reduced duty rates, thus decreasing imports. "If we use that excess capacity in the domestic market, then these goods would be available in India at competitive prices," Goyal mentioned in an interview.

This initiative aims to reduce imports from countries like Vietnam, which benefits from duty-free entry into India under a free trade agreement with ASEAN. Goyal noted that while SEZ units can sell a portion of their production domestically, exports will remain their primary focus.

Impact on Domestic Industry

Goyal assured that the domestic industry would not be adversely affected by this measure. Some sectors, such as oil refineries, may be excluded from this scheme for domestic sales. He added that details of the announcement would be released within the next 1-2 months.

SEZs are considered foreign territories for customs and import duties, with restrictions on duty-free domestic sales. Companies in SEZs can import materials duty-free if the finished products are exported from India. They can sell domestically by paying applicable duties on output.

SEZs: An Overview

There are 276 operational SEZs with 6,279 units across India. These zones have seen exports rise by 7.37% to USD 172.27 billion in 2024-25. SEZ developers and units have received tax benefits, which has led to opposition from domestic industries fearing disadvantage due to existing tax concessions for SEZs.

The government plans regulatory changes to implement these measures while maintaining fair competition for non-SEZ units. The initiative is expected to provide opportunities for excess capacities to serve the domestic market and replace some imports.

With inputs from PTI