The government is likely to extend the special duty relief for Special Economic Zone (SEZ) units selling goods in the domestic market beyond a year, as the benefit has seen limited uptake, sources aware of the matter said.
Commerce ministry is coordinating with other departments to seek an extension of the relief, which was introduced from April 1 for one year. The ministry has flagged that more than 90% of current supplies from SEZs to the Domestic Tariff Area (DTA) receive only about one percentage point of customs duty benefit.
“It may get extended beyond a year. We have flagged how the scheme is not benefiting as was intended,” an official aware of the matter said.
Under the notification, SEZ units selling goods in the DTA can avail concessional basic customs duty rates instead of paying the full applicable duty. For instance, a unit that would otherwise pay 7.5% customs duty would pay 6.5%, resulting in a benefit of only one percentage point in such cases.
“The benefit in some cases is only about one percentage point, while the compliance burden remains. Companies did not find the benefit substantial enough to justify the additional compliance requirements,” the official said.
The Union Budget 2026-27 had announced a one-time relief window for eligible manufacturing units in SEZs to sell in the DTA at concessional basic customs duty rates for one year.
A Commerce Ministry official said exporters were already facing weak capacity utilisation amid the West Asia crisis and uncertainty over US trade. An extension of the relief beyond a year could provide temporary support until a broader review of the SEZ framework is completed.
An inter-ministerial committee has been constituted to examine possible changes to the SEZ framework and their impact on domestic industry. The ministry is also considering allowing reverse job work, under which SEZ units could undertake job work or production services for companies in the DTA.
The committee is expected to submit its report within the next two months, following which wider reforms could be considered based on its recommendations.
