The Central Board of Indirect Taxes and Customs (CBIC) has issued a clarification stating that goods supplied from Special Economic Zone (SEZ) units to the Domestic Tariff Area (DTA), upon payment of applicable duties and subsequently re-exported, will be treated as imported goods for the purpose of duty drawback.
The instruction seeks to standardise the treatment of such transactions, specifying that goods cleared into the DTA from SEZ units after payment of customs duties will qualify as “imports” if they are later re-exported. This classification enables exporters to claim duty drawback under Section 74 of the Customs Act, 1962.
The clarification follows audit observations highlighting divergent practices across customs formations in processing duty drawback claims filed by DTA units. According to the CBIC, some field formations had not treated SEZ-to-DTA clearances as imports and had consequently denied drawback claims under the relevant provisions.
The board stated that, in cases where goods are cleared into the DTA from an SEZ unit on payment of applicable duties and are subsequently re-exported, such goods are to be treated as imported goods for the purpose of disbursement of drawback under Section 74 of the Customs Act, 1962.
Commenting on the development, the Global Trade Research Initiative described the move as a fair and welcome clarification. The organisation noted that by treating duty-paid goods supplied from SEZs to the DTA as imported goods for the purpose of refunds when re-exported, the instruction removes an unnecessary ambiguity that had led to inconsistent practices across customs jurisdictions.
Ajay Srivastava, founder of the think tank, stated that the clarification would bring uniformity, reduce litigation, and ensure fairness for exporters who had already paid applicable customs duties. He added that there was no justification for such duties to remain locked when the same identifiable goods were exported again, and that the change would improve cash flows and provide greater certainty to DTA buyers, exporters, and SEZ suppliers.
The Federation of Indian Export Organisations also welcomed the decision, stating that it provides much-needed clarity on the eligibility of duty drawback for re-exports of goods supplied by SEZ units to the DTA. The organisation noted that aligning the treatment with import principles and permitting drawback under Section 74 removes long-standing ambiguity and supports exporters’ liquidity. It further called for uniform and facilitative implementation at the field level to ensure that the benefits are fully realised, particularly for micro, small and medium enterprises.
