On April 1st, 2026, the Government of India has introduced a new policy framework granting conditional customs duty concessions on goods manufactured in Special Economic Zones (SEZs) and cleared into the Domestic Tariff Area (DTA). The measure, announced in line with the Union Budget 2026, is designed to improve capacity utilisation among SEZ manufacturing units impacted by global trade disruptions while maintaining the export-oriented character of the SEZ regime.
The initiative is expected to benefit approximately 1,200 SEZ manufacturing units by enabling economies of scale, lowering production costs, and enhancing operational resilience. Under the framework, eligible SEZ units may supply goods to the domestic market at concessional duty rates, subject to a cap of 30% of the highest annual export value (FOB) achieved in any of the preceding three financial years.
To safeguard against unintended advantages, the policy explicitly disallows export-related incentives, such as duty drawback on inputs, for goods cleared into the domestic market. Additionally, qualifying units must meet a minimum value-addition requirement of 20%, calculated based on defined cost and valuation parameters.
The concessional regime applies across a wide spectrum of sectors, including chemicals, textiles, machinery, transport equipment, and electronics, among others. The measure has been implemented through a customs notification issued under the Customs Act, 1962.
From a trade compliance perspective, companies operating in or sourcing from SEZs should assess eligibility criteria, monitor value-addition thresholds, and ensure proper documentation to support concessional claims. The policy reflects India’s ongoing efforts to enhance manufacturing competitiveness while maintaining regulatory balance between export promotion and domestic market integrity.
Please refer to the following press release from the Ministry of Commerce & Industry:
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2247993&utm