The proposed relaxation of rules to enable units in Special Economic Zones (SEZs) to sell their output in the domestic market in next year’s budget will be for select labour intensive sectors that are under pressure due to global trade disturbances, an official said.
About 7-8 sectors including leather, textiles, engineering goods will be the beneficiaries of the proposal, commerce secretary Rajesh Agrawal said. The bigger SEZs like the ones involved in petroleum refining would be kept out of this one-time relaxation.
Who would frame the guidelines for this proposal?
The guidelines for this proposal would be framed by the Central Board of Indirect Taxes and Customs (CBIC) and will take another 2-3 months. This has been the long-pending demand of the SEZ units.
Even now the sale by SEZs in the domestic market is allowed but they are treated as imports in terms of taxation and taxes on imports of textiles, apparel and leather goods are high in India.
In her budget speech Finance Minister Nirmala Sitharaman said that as a special one-time measure, sales by eligible manufacturing units in SEZs to the Domestic Tariff Area (DTA) will be allowed at concessional rates of duty.
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 level-playing field for the units working in the DTA.
The SEZs are treated as a foreign territory and units there are geared towards exports. Apart from basic customs duty, the sales in Domestic Tariff Area by SEZs also attract Integrated Goods and Services Tax (IGST), antidumping, countervailing and safeguard duties where applicable.
Labour intensive goods
Labour-intensive goods which are coming from countries such as Vietnam and Bangladesh at concessional import duties into India, can now be imported from SEZs, Agrawal said.
The move is also important as when SEZ law was formulated in 2005, Indian trade policy was different and now the situation has changed due to global developments.
“Now we have done multiple Free Trade Agreements (FTAs) through which goods are entering the country at concessional duties,” he said. SEZ units have also flagged the issue of FTAs and sought parity on duties with imports from FTA partners.
There are 276 operational SEZs, with 6,279 units, in the country. In 2024-25 total exports from the SEZs stood at $ 176.6 billion dollars. Of the total the merchandise exports stood at $ 69 billion growing at 9% on year.