Special Economic Zone (SEZ) units have written to the government seeking higher concessions —or even zero-duty treatment—for supplies to the domestic tariff area (DTA), aligning them with concessional import duties available under free trade agreements (FTAs).
They argued that competing with imports, particularly from China and FTA partner countries, has become increasingly challenging.
According to an official, SEZ units have told the government that their primary competition is not domestic manufacturers in the DTA but imports by traders from FTA countries such as ASEAN, as well as low-cost, high-quality Chinese goods. They have sought higher concessions for specific HSN categories where such imports dominate, to enable SEZ units to effectively substitute these goods.
SEZ units have also demanded that goods supplied from SEZs to the DTA be allowed at concessional duty rates equivalent to those applicable on imports from China or FTA partner countries.
Industry representatives have earlier flagged that the government’s proposed conditional concessional customs duty regime for DTA sales would offer limited or no benefit to most manufacturers. As a one-time measure, the government has allowed SEZ units to undertake DTA sales at concessional customs duty for FY27, subject to 20% value addition and a 30% export-linked cap.
According to estimates by the Export Promotion Council for EOUs and SEZs, 62% of operational SEZ units account for 96.5% of total manufactured goods sold in the DTA. Nearly 93% of these goods fall within the top 200 product categories. Sources said most of these units are unlikely to see meaningful benefits under the current framework.
SEZ units have urged the government to disclose the methodology for calculating duty foregone and any equalisation duty applied in arriving at the concessional rates.
They have also sought duty reversal-based access for labour-intensive sectors such as textiles, leather and footwear, as well as for high-tech segments including defence, space and R&D, particularly for supplies to public sector entities.
Additionally, the industry has requested permission to accept payments in rupees for services supplied to government agencies. IT/ITES firms in SEZs have sought clarity on whether rupee-denominated services to DTA units are permitted, how the 30% DTA sales cap is computed, and whether deemed exports are included.
They have also sought clarity on whether services beyond the prescribed cap can be provided on payment of IGST.