Vaccine maker Serum Institute of India (SII) is currently awaiting clarification on the applicable rates for supplies from the Special Economic Zone (SEZ) to the domestic tariff area (DTA) following the government’s announcement of changes to SEZ rules in the 2026 Budget.
To address the concerns arising about utilization of capacities by manufacturing units in the SEZs due to global
trade disruptions, the FM had proposed, 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.
Quantity of such sales
The quantity of such sales will be limited to a prescribed proportion of their exports. “Necessary regulatory changes will be undertaken to operationalise these measures while ensuring a level playing field for the units working in the DTA”.
The specific rates were not disclosed in the budget. A decision will be made after a meeting between the finance and commerce ministries. SII is awaiting the official guidelines to understand how the budget changes will impact them.
What did P C Nambiar say?
According to P C Nambiar, director of Serum Institute of India and head of the Pune Export-Oriented Unit (EoU) and SEZ Association, at present, any goods moved from the SEZ to the DTA are treated as imports into India and are subject to standard customs duties based on the value of the finished goods.
This treatment has rendered SEZ goods non-competitive in the Indian market, resulting in underutilization of manufacturing capacity, Nambiar said.
Approximately 60% of SII’s supplies are directed to the government. If a duty is imposed on supplies to the domestic market, it could lead to increased prices for vaccines provided under the government’s immunization program. Or the company would have to absorb this duty, which would affect its competitiveness.
Vaccines sold by SII from the SEZ to the government are treated as sales in the DTA and incur a full basic customs duty of 10%. The health ministry, which is a key customer, is unwilling to pay this additional duty, meaning SII has to absorb the cost.
While the health ministry recommended waiving the basic customs duty for government market supplies, the finance ministry has not accepted this suggestion. The industry advocates that the government permit clearance in the domestic area on a `duty-forgone basis’.
According to the announcement, SEZs will be allowed to sell in the DTA based on the proportion of goods exported. The DTA sale of finished goods will be at a concessional duty rate, though the exact rate will decide the fate of manfuacutring from the SEZs.