Customs Duty Reduction for SEZ Units

The government has reduced Customs duty rates for goods manufactured by Special Economic Zones (SEZ) when cleared into the Domestic Tariff Area (DTA) to improve capacity utilization without disadvantaging DTA units.

SEZ and DTA Dynamics

• SEZs are treated as territories outside India’s Customs territory.
• SEZ units must pay Customs duties on DTA clearances, similar to import duties.
• SEZ units sought parity with Export-Oriented Units (EOU), which only surrender input duty concessions for DTA sales.

Duty Reduction Details

The reduction process is easier than reversing input concessions, but the actual reduction is minimal for most goods.

• 1% reduction for goods like chemicals and engineering products with standard 10% or 7.5% duties.
• Substantial reductions on few high-duty items.

Conditions for Concessional Duty

• Production must start before March 31, 2025.
• Minimum 20% value addition is required.
• Concessional duty limited to 30% of the highest export level in the prior three years.
• Ineligibility for Foreign Trade Policy (FTP) or duty drawback (DBK) benefits on domestically sourced inputs used for DTA clearances.

Additional documentation includes certification from the jurisdictional Development Commissioner (DC).

Procedural Improvements

• Bills of entry claiming concessions will be processed through the risk management system and faceless assessment.
• Post-assessment formalities like examination and grant of "out of charge" orders will be handled by SEZ Customs officers.

Impact on SEZ Units

• SEZ units source inputs from DTA, zero-rated under GST and treated as exports under SEZ laws.
• The benefits under FTP and DBK lead to lower input costs for SEZ units.
• Units whose finished goods attract 7.5% or 10% duties might not prefer a mere 1% concession.

The initiative, although well-intentioned, may not attract SEZ units due to minor duty reductions and stringent conditions.