- Introduction
In pursuance of the Union Budget 2026-27 announcement to address the concerns faced by the manufacturing units in the Special Economic Zones (SEZ) due to ongoing global trade disruptions, the Central Board of Indirect Taxes and Customs (CBIC) introduced a special one-time relief measure to facilitate sales by eligible manufacturing units in SEZs to the Domestic Tariff Area (DTA) at concessional rates of duty. The Union Budget announcement is being implemented through an exemption notification No. 11/2026-Customs dated 31 March 2026, granting conditional exemption from Basic Customs Duty (BCD) on specified goods supplied to the Domestic Tariff Area (DTA).
This move marks a shift towards facilitating domestic clearances by SEZ units while maintaining a structured compliance framework.
2. Background
Supplies from SEZ to DTA have historically been treated as imports into India, thereby attracting full customs duties, including BCD and IGST, as applicable to foreign imports.
The present notification introduces a partial exemption mechanism, wherein BCD in excess of prescribed rates is exempted for notified goods. However, this benefit is subject to specific eligibility conditions, including that the SEZ unit must have commenced production on or before 31 March 2025.
- Key Conditions for Availing the Exemption
The exemption is conditional and requires strict adherence to the following:
| Sr. No. | Condition | Requirement | Action Points |
| 1 | Filing of Bill of Entry | BOE for home consumption to be filed on common portal | Same will be assessed by customs officer |
| 2 | Manufacture and Value Addition | Goods must be manufactured within the SEZ unit on or before 31.03.2025 and a minimum value addition of 20% is mandatory | Value addition is calculated by reducing value of imports and local inputs used in such supplies from Assessable value of sale in DTA. Further date of manufacturing and tracking thereof is essential and also to appear on Invoice, packing list and BOE. |
| 3 | DTA Clearance Restriction | DTA clearances must not exceed 30% of the highest annual FOB value of exports of manufactured goods in any one of the preceding three financial years. | Product wise exports for preceding 3 years to be ascertained and DTA sale limit has to be set maximum up to 30% of highest annual value of the exports of such manufactured goods. It is advisable to get it certified from Chartered Accountant A / Cost Accountants. |
| 4 | Restriction on Export Benefits | SEZ unit should not have availed duty drawback or any export incentive under the Foreign Trade Policy on inputs used in such goods | Any export against which Bill of export is filed will not be counted for the purpose of calculation of DTA sale |
| 5 | Documentation and Undertakings | Certificate from Development Commissioner stating • Date of commencement of production • Export performance (FOB value for preceding three years) • Achievement of minimum 20% value addition |
Since this is practically challenging to have the same before clearance of goods in DTA, it is advisable to calculate value addition and DTA sale limit as mentioned in above para which is advisable to get certified from Chartered Accountant A / Cost Accountants and thereafter approach Development Commissioner for yearly permission rather than for certificate for each clearance of DTA sale |
| Declaration / Undertaking • An undertaking must be provided to pay the duty foregone in case of non-fulfilment of conditions |
Concessional Rates
Under this relief window, concessional rates of customs duty have been prescribed for notified goods for each HSN which ranges as per the details below:
| Sr. No. | Present customs duties | Concessional rate for eligible SEZ units under the relief window | Concession % |
| 1 | 7.50% | 6.50% | 13.33% |
| 2 | 10% | 9% | 10.00% |
| 3 | 12.5%, 15% | 10% | 40 % / 33.33% |
| 4 | 20% | 12.50% | 37.50% |
| 5 | Between 20% and 30% | 15% | 25% / 50% |
| 6 | Between 30% and 40% | 20% | 33.33% / 50% |
- Clarifications by CBIC
Further clarity has been provided through Circular No. 18/2026-Customs dated 01 April 2026, which states that:
- Valuation and assessment shall be governed by the Customs Act and valuation rules
- Bills of Entry will be processed under faceless assessment
- Transactions will be routed through the Risk Management System (RMS)
- Practical Implications
This notification is a welcome policy intervention with the following implications:
Positive Impact
- Encourages domestic market participation by SEZ units to the extent of limited stock manufactured prior to 31.03.2025 and lying in stock as on 31.03.2026
- Reduces cost burden for DTA buyers through lower BCD incidence
- Very temporary relief to liquidate the stock
Compliance Challenges
- Accurate value addition computation (20%)
- Continuous monitoring of DTA clearance thresholds (30%)
- Timely procurement of Development Commissioner certification
- Ensuring non-availment of export incentives on inputs
- Considering domestic inputs for calculation of value addition
Audit and Compliance Oversight
Units availing this exemption will be subject to audit under Rule 79 of the SEZ Rules, 2006, thereby necessitating robust documentation and internal controls.
- Conclusion
The introduction of concessional BCD on SEZ-to-DTA supplies reflects as a fulfilment of commitment made in budget speech by H’ble Finance Minister Mrs. Nirmala Sitaraman who has stated in her budget speech
“To address the concerns arising about utilization of capacities by manufacturing units in the Special Economic Zones due to global trade disruptions, I propose, as a special one-time measure, to facilitate sales by eligible manufacturing units in SEZs to the Domestic Tariff Area (DTA) at concessional rates of duty. The quantity of such sales will be limited to a prescribed proportion of their exports. Necessary regulatory changes will be undertaken to operationalise these measures while ensuring level-playing field for the units working in the DTA”
As a matter of fact in the earlier DESH bill, which was never been produced again after withdrawal, which was proposing the duty payment equal to the duty forgone on imported goods used in the manufacture of goods cleared goods in DTA and hence it is only for time being relied only for stock clearance as on 31.03.2025 which might have been piled up on account of international volatile situation or different ground. It will not suffice the requirement of SEZ unit or SEZ’s. Neither it will promote manufacturing in SEZ.
