More investments to flow into SEZs if govt allows tax flexibilities for domestic sale: EPCES
The proposed move will also help SEZ units compete with imports from free trade agreement partner countries
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RAJU V
More investments would flow into Special Economic Zones (SEZs) if the government agrees to allow units to sell in the domestic market on a duty foregone basis instead of paying full customs duties that make products uncompetitive, SEZ units and developers have highlighted in a meeting with top government officials.
The proposed move will also help SEZ units compete with imports from free trade agreement (FTA) partner countries, including the ASEAN, that ship several products to India duty free while SEZs have to pay customs duties to sell in the domestic tariff area (DTA), the EPCES argued in its interaction with Commerce Secretary Rajesh Agarwal on Tuesday.
Nike factory
Explaining with an example, Export Promotion Council for EOUs and SEZs (EPCES) Director General Alok Chaturvedi pointed out that presently Nike shoes were exported to India from factories in Vietnam under the India-ASEAN FTA. The Indian Nike factory established in an SEZ only served the export market because full customs duties need to be paid under the present rules on supplies to the domestic market.
“Sometimes companies export to Sri Lanka and import back to India after some value addition under SAFTA agreement to serve the domestic Indian market to avoid paying full customs on direct supplies from SEZ to the Indian market. Thus, we are losing business and employment generation in Indian SEZs,” Chaturvedi said. Many countries, including China, Indonesia, the US and the UK allowed SEZ to DTA, he added.
Allowing SEZ units to sell in the DTA on a ‘duty foregone’ basis would mean that their duty payable will be based on the duty on the raw materials used to manufacture those goods and not customs duties on the final product.
The government is already looking at ways to grant some operational flexibilities to SEZs to give units a boost given the high tariffs imposed by the US on most Indian goods.
The Commerce Department is in talks with the Department of Revenue on the measures that could be extended to SEZs, either as part of the SEZ Amendment Bill being finalised or as executive orders, to give them operational ease.
Published on October 8, 2025
