At present, SEZs can sell in the DTA only after paying full duties on finished products. They directly employ over 31 lakh people. The new proposal also includes allowing reverse job work in SEZs. To fast-track implementation, officials are pushing for approval through an exemption notification under Section 25 of the Customs Act, instead of the longer route of a Parliamentary amendment.
The government had earlier considered introducing these measures through an SEZs Amendment Bill to improve capacity utilisation, particularly for low-performing zones. Officials say only a portion of SEZ production will be allowed for domestic sales, subject to turnover-based limits. They argue that higher SEZ output could attract large investments and boost exports alongside domestic sales.
Still, there is resistance within the government. Critics fear revenue losses, unfair competition for domestic players who don’t enjoy duty benefits, and a flood of SEZ-made goods in the domestic market.
Supporters counter that units in the DTA already enjoy incentives like Export Oriented Unit (EoU) schemes, EPCG, and Advance Authorization. They stress that the plan is revenue-neutral under GST, will require SEZs to maintain a positive Net Foreign Exchange (NFE) balance over five years, and can be ring-fenced with limits on DTA sales.
Sources also noted that the largest contributor to DTA sales from SEZs—the gems and jewellery sector—is already operating at full capacity, reducing the risk of market flooding.
By law, SEZs are treated as foreign territories for trade and customs purposes, with restrictions on duty-free domestic sales. Despite this, they play a vital role in India’s exports: outward shipments from SEZs rose 8% to $143.34 billion in April–January 2024-25, accounting for more than a third of India’s total exports.
So far, 416 SEZs have been approved by the government, of which 276 were operational as of March 18 this year. A total of 6,279 units had been approved till March 31, 2024.
