The government is considering measures that will allow units in special economic zones (SEZs) to sell their output in the domestic market on easier terms, and even allow an inventory-based model for e-commerce for exports, in an effort to counter the impact of escalated 50% tariffs imposed by the United States.
While SEZs are allowed to sell in the domestic market, they are treated as imports in terms of taxation. With the tariff escalation, the SEZs face a risk of decline in orders that contribute significantly to labour-intensive exports. “The SEZ policy flexibility and providing them with a domestic outlet will enable them to sustain production volumes and scale. Costs will be spread over larger output, improving economies of scale and competitiveness, ultimately benefiting exports in the longer term,” said a senior official.
The inventory model for e-commerce exports would allow third-party facilitation entities to manage compliance and logistics. “This will ease the burden of micro, small and medium enterprises (MSMEs) to focus on quality and branding,” the official added. Currently, domestic e-commerce platforms are not allowed to use the inventory-led model and can only function as marketplaces.
SEZ reforms for domestic market access
DHL, Go Glocal and Lexship have already been selected to run pilots for e-commerce export hubs. These hubs will simplify return logistics, easier inter-state movement and GST refunds.
The official said the exporters may face delayed payments, stretched receivable cycles and cancelled orders due to the tariff shock. “To prevent working capital stress and protect employment, the government is considering several steps to ease liquidity, prevent insolvencies, and allow exporters to sustain operations until new markets are tapped,” he added.
The government is also banking on reforms in the goods and services tax to alleviate the pain of exporters. “The reforms have the potential of not only creating opportunities for exporters to sell more in the domestic market to cater to this increased demand, but will also enhance export competitiveness due to reduction in the amount locked in inputs costs,” the official said.
The 50% tariffs by the US affect almost $49 billion worth of exports to the US — equivalent to more than 55% of India’s shipments to this market. While India’s overall trade exposure to the US is 18-20% of merchandise exports, the dependence in certain sub-sectors is high. Around 60% of carpets, 50% of made-ups, 30% of gems and jewellery, and 40% of apparel exports are destined for the USA.
SEZ Exports
In 2024-25, total exports from SEZs stood at $176.6 billion. Of this, merchandise exports stood at $69 billion, growing at 9% on year. During the previous financial year, goods exports from SEZs to the US — their biggest market — grew 20% on year to $15.2 billion.
SEZs export drugs and pharma ($4.07 billion), petroleum products ($3.5 billion), gems and jewellery ($3.3 billion), engineering goods ($1.94 billion) and chemicals ($708 million).