The government has notified conditional customs duty concessions on goods manufactured in Special Economic Zones (SEZs) and cleared to the Domestic Tariff Area (DTA), in line with the Union Budget 2026 announcement. The measure is aimed at improving capacity utilisation among manufacturing units affected by global trade disruptions, while preserving the export-oriented framework of SEZs.
The initiative is expected to benefit around 1,200 SEZ manufacturing units by enabling economies of scale, lowering production costs and strengthening operational resilience.
Under the new framework, eligible SEZ units will be permitted to clear goods into the DTA at concessional duty rates. However, such clearances will be capped at 30% of the highest annual Free on Board (FOB) export value achieved in any of the three preceding financial years. Export-linked benefits, including duty drawback on inputs, will not be allowed for these transactions in order to prevent double benefits.
The notification also sets out key eligibility criteria, including a requirement for a minimum 20% value addition within the SEZ. This will be calculated based on a prescribed formula that factors in assessable value and input costs.
The concessional duty regime spans a wide range of sectors, including textiles and textile articles, footwear and headgear, chemical products, hides and skins, leather goods, articles of furskins and other manufactured products.
To avail of the benefits, SEZ units must furnish a certificate from the Development Commissioner confirming compliance with the stipulated conditions, along with a declaration undertaking to pay full duties in case of non-compliance. Units will also be subject to audit under the SEZ Rules, 2006.
The notification, issued under Section 25(1) of the Customs Act, 1962 through Notification No. 11/2026-Customs dated 31st March 2026, will be effective from 1 April 2026 to 31 March 2027. It provides for reduced customs duty rates and, in certain cases, partial exemption from the Agriculture Infrastructure and Development Cess.
The provisions apply to SEZ units that commenced production on or before 31 March 2025 and meet the prescribed conditions. However, Free Trade Warehousing Zone units and goods that are merely imported into SEZs and cleared into the DTA without sufficient manufacturing activity are excluded from the scheme.
Officials indicated that, under Section 30 of the Special Economic Zones Act, 2005, goods cleared from SEZs to the DTA are treated as imports into India and are subject to applicable customs duties, which has historically impacted the competitiveness of SEZ manufacturers. They added that the new measure seeks to address this issue while maintaining a level playing field for units operating within the DTA.
