SEZ Concessions Amidst Global Tensions

In response to pressures from global geopolitical tensions and the impact of US tariffs, the Indian government has announced one-time concessions for Special Economic Zones (SEZs) effective from April 1, 2026, to March 31, 2027. This move aims to support SEZ manufacturers, facilitating sales to the Domestic Tariff Area (DTA) at concessional rates of duty.

Implementation and Exclusions

• The concessions are implemented by the Central Board of Indirect Taxes and Customs (CBIC).
• Select sensitive sectors are excluded to protect domestic industries.
• Petrol and diesel are excluded, only petroleum coke is included.

SEZ Performance and Reforms

• SEZs enjoy tax benefits and employ over 31 lakh people.
• 450 units have closed over the last five years till FY25.
• This measure is a one-time relief, not indicative of broader policy changes.

Conditions for Concessions

• Units must have commenced production by March 31, 2025.
• Products must have a minimum of 20% value addition.
• DTA sales at concessional rates capped at 30% of the previous highest annual Free on Board (FOB) value of exports.

Impact and Expert Opinions

The impact of these measures is expected to be modest:

• Limited duty cuts and no relief on IGST.
• 30% cap on domestic sales restricts flexibility.
• Policy excludes key refinery-linked products.

Experts suggest stronger measures may be needed to boost domestic supply, such as export restrictions on critical fuels.

Industry and Employment Implications

• This one-time concession introduces controlled flexibility for SEZs, providing some relief amidst global disruptions.
• The move is expected to stabilize manufacturing operations and support employment continuity.
• It also benefits ancillary industries by ensuring steady demand and operations.