Intended to support manufacturers facing cost and supply-chain pressures, the new SEZ duty concession offers some breathing room; yet industry experts say it falls short of meaningful relief. Why?
On March 31, 2026, the government of India agreed on a one-time relaxation for special economic zone (SEZ) units across India to sell goods in the domestic tariff area (DTA) at concessional duty rates.
However, the industry regarded this as limited relief. They warned that strict conditions, compliance requirements and legal ambiguities may reduce its overall benefit for sectors such as electronics. This issue was discussed in a webinar titled ‘One-Time Relaxation for SEZ Units’ organised by ELCINA along with Lakshmikumaran & Sridharan on April 15, 2026.
Two Executive Partners of Lakshmikumaran & Sridharan, Ratan Jain and Nupur Maheshwari, explained the impact of Notification No. 11/2026-Customs, which applies to SEZ units across India.
For quite some time, electronics manufacturers operating in SEZs have been dealing with supply chain disruptions, rising logistics costs and tariff pressures. The relaxation is intended to offer temporary support without altering the broader SEZ framework.
Under the notification, certain goods can be cleared into the DTA at reduced basic customs duty (BCD) rates. For example, products under key electronics categories such as 8501, 8502, 8508, and 8517 attract concessional BCD ranging from 6.5% to 12.5%, compared to standard rates of up to 25%.
However, speakers noted that the relief is only partial because integrated goods and services tax (IGST), social welfare surcharge (SWS) and other levies continue to apply.
The scheme applies only to goods manufactured within SEZs and excludes trading units, free trade warehousing zones (FTWZ), and repair activities. Goods falling under lower duty slabs of 2.5% and 5%, as well as those above 25%, are also not covered.
The speakers noted that units must achieve a minimum value addition of 20% to qualify for the benefit. In addition, the total value of goods that can be sold in the domestic market is capped at 30% of the highest export value in the last three financial years.
The webinar also presented an example showing that if a unit’s highest export value is ₹1.5 billion, it can sell goods worth up to ₹450 million in the domestic market under the scheme.
SEZ units are required to file bills of entry, undergo assessment by the proper officer and obtain certification from the jurisdictional Development Commissioner. The process is subject to scrutiny, which may increase the likelihood of disputes and, according to the speakers, adds to the compliance burden on units.
Several grey areas were flagged during the discussion, including how export value should be calculated for multi-product units, whether certification is required for every DTA clearance, and whether DTA buyers can file bills of entry. There is also a lack of clarity on how the 30% cap will be calculated, especially in cases involving deemed exports or return of goods.
Experts pointed out another major concern: the legal ambiguity surrounding interest and penalties. In some cases, authorities have imposed interest and penalties, although the SEZ law does not clearly provide for such actions in this context.
Industry representatives also noted that imports under free trade agreements (FTAs) attracting zero duty may, in some cases, remain more competitive than the concessional rates offered under the scheme.
ELCINA has suggested that the current relief is insufficient to reduce the overall cost burden, as major components of duty, such as IGST and SWS, continue to apply. The industry body has called for deeper cuts in the BCD and the agriculture infrastructure and development cess (AIDC), the extension of the scheme beyond one year, and the expansion of the list of eligible goods. It has also asked for clearer rules and simpler compliance requirements to avoid confusion and litigation.
Overall, while the one-time relaxation provides some relief to SEZ units, experts believe its effectiveness will depend on how the government addresses implementation gaps and clarifies key issues.
Pratyush Kumar has a background in TV reporting and a keen interest in electronics, technology, emerging gadgets, and market trends.
