Budget 2026-27 may announce SEZ reforms to boost exports and domestic sales

The government is considering announcing a Special Economic Zone (SEZ) reforms package in Budget 2026-27 to strengthen manufacturing competitiveness and help exporters tap the domestic market amid global uncertainty and US tariffs.
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DEEPAK KR/THE HINDU

The government is considering announcing a SEZ reforms package as part of Budget 2026-27 to boost manufacturing competitiveness and help exporters better leverage the domestic market as they grapple with global uncertainties and US tariffs, sources said.

Discussions between the Commerce and Revenue Departments are currently ongoing with a focus on proposed flexibilities such as easier domestic market access, the introduction of reverse job-work, and allowing INR payments for services provided by SEZs to domestic units, a source tracking the matter told businessline.

Budget route for reforms

“The government has been working on SEZ reforms for a long time and a lot of inter-ministerial discussions have already taken place on many of the proposals being pushed by SEZs and backed by the Commerce Department. As tabling of the SEZ Amendment Bill has not yet been possible due to various delays despite several attempts of the Commerce Department, the idea is to expedite the reforms through Budget announcement,” the source said.

DTA sales demand

SEZs have long demanded that units should be allowed to sell in the DTA (domestic tariff area) on a `duty foregone’ basis to bring down the burden of duties. That would mean their duty payable should be based on the duty on the raw materials used to manufacture those goods, not on customs duties on the final product.

Parity with FTA partners

The Export Promotion Council for EOUs and SEZs’ argument has been that giving SEZ units exemption from paying customs duties will bring them at par with FTA partner countries–for instance, the ASEAN bloc–that sell their goods in the Indian market duty-free.

Job work proposal

Another demand being considered on priority for the budget is to allow SEZ exporters to undertake “job work” for domestic clients. “This would help utilise expensive machinery and idle capacities and keep skilled labor employed when global demand is low,” the source explained.

INR payments for services

A third demand is that SEZ service units should be allowed to accept INR payments for services rendered to DTA units. “Often, domestic units that want to avail of services from SEZ service providers are constrained by the rule requiring payments to be made in foreign currency. If INR payments are allowed, it will boost demand,” the source said.

Built-in safeguards

There are safeguards being put in all proposals to address concerns of other Ministries and Departments, the source added.

“The proposed SEZ reforms, which also include measures for ease of doing business and overhaul of SEZ framework, are also seen as mitigating the effects of Trump tariffs,” the source said.

Domestic market push

Following US President Donald Trump’s imposition of 50 per cent tariffs on most Indian exports, the government is focused on leveraging the domestic market more for exporters.

SEZ employment base

There are over 276 operational SEZs employing over 31,94,104 persons, according to government figures.

Exports from SEZ units in 2024-25 were valued at $, up 7.37 per cent from the previous fiscal.

Published on January 19, 2026