The Union Budget has allowed SEZs (Special Economic Zones) to sell in the domestic market at lower duties. Government sources told CNBC-TV18 that operational details for the scheme will be worked out over the next few months. The budgetary proposal outlines a special one-time measure to allow eligible manufacturing units in SEZs to sell to the Domestic Tariff Area (DTA) at concessional duty, with the quantity of such sales limited to a prescribed proportion of their exports.
In December 2025, CNBC-TV18 reported, citing government sources, that plans were underway to allow SEZs to sell in the domestic market on a duty-foregone basis. Sources said a push is likely for the SEZ (Amendment) Bill in Parliament to support exporters facing slack demand amid global trade uncertainties. Labour-intensive exporters operating at lower capacities risk layoffs until they secure new clients. The proposed SEZ Bill aims to help such units by allowing domestic sales on a duty-foregone basis.
The proposal seeks to utilize unused capacity in SEZs to boost jobs, incentivize capacity addition, and attract investment, while retaining the requirement for SEZs to remain NFE-positive for five years. It also allows for reverse job work. Sources assured that the bill would not hurt domestic manufacturers, as SEZs would primarily replace imports from FTA partner countries. Many manufacturers of labour-intensive goods currently find it cheaper to import from their overseas facilities than from Indian SEZs. Allowing domestic sales from SEZs would replace some of these imports. Sources added that several countries with successful SEZ models already allow domestic sales on a duty-foregone basis.
In July 2025, CNBC-TV18 had reported, citing sources, that the bill aims to make SEZs more viable and improve capacity utilization, particularly for underperforming zones. Proposed amendments would allow only part of production to be diverted to the DTA, subject to rules on turnover proportion. Government sources projected that the amendment could trigger significant investment in SEZs. The government hopes this will help mitigate current export headwinds by increasing production.
Last December, government sources told CNBC-TV18 that the DESH (Development of Enterprise and Services Hub) Bill had been shelved, with most of its proposed amendments integrated into the SEZ Amendment Bill. Sources said the government plans to introduce changes to SEZ rules and subordinate legislation to address immediate concerns, as passing the bill may take time. Investor interest in SEZs had declined following the removal of direct tax breaks, and the government aims to offer incentives to make SEZ investments more attractive.
Discussions on the DESH Bill in 2022 involved the Ministry of Commerce & Industry and the Department of Revenue attempting to resolve tax-related differences. These discussions also included demands to drop corporate tax concessions in the proposed bill. Earlier, the Finance Ministry had objected to extending the 15% corporate tax rate till 2032. While both ministries considered changes to boost exports, the Commerce Ministry was keen to exempt SEZs from the NFE evaluation criteria despite objections from the Finance Ministry and NITI Aayog.
