The Central Government has issued Notification No. 11/2026-Customs, granting conditional customs duty exemptions on goods manufactured by Special Economic Zone (SEZ) units and supplied to the Domestic Tariff Area (DTA). The notification will come into effect from April 1, 2026.
Key Highlights of the Notification
1. Duty Relief for SEZ-to-DTA Supplies
The notification provides that:
- Goods manufactured by SEZ units and cleared into the DTA will be eligible for partial exemption from Basic Customs Duty (BCD).
- The exemption is applicable only to the extent duty exceeds the specified concessional rates listed in detailed schedules.
2. Coverage Across Multiple Sectors
A wide range of goods across industries such as:
- Chemicals and petrochemicals
- Plastics and polymers
- Textiles and fabrics
- Metals and machinery
- Electronics and electrical goods
have been included in the notification, with BCD rates ranging from 6.5% to 15% depending on the product category.
3. Additional Relief on AIDC
For certain goods, the exemption also extends to:
- Agriculture Infrastructure and Development Cess (AIDC)
- Relief is provided where the applicable cess exceeds the prescribed rates in the notification.
4. Eligibility Conditions for SEZ Units
To claim the exemption:
- The SEZ unit must have commenced production on or before March 31, 2025
- The unit must demonstrate compliance with all conditions specified in the notification
- Units will be subject to audit under SEZ Rules, 2006
5. Key Exclusions
The exemption will not apply to:
- Units located in Free Trade and Warehousing Zones (FTWZ)
- Goods imported into SEZ and subsequently cleared into DTA without substantial manufacturing
6. Validity Period
- The exemption will remain in force from April 1, 2026 to March 31, 2027, unless extended or modified.
Impact on Industry and Trade
This notification is expected to:
- Boost the competitiveness of SEZ manufacturers in the domestic market
- Encourage local production and value addition
- Reduce tax burden on key sectors and improve ease of doing business
However, businesses must carefully evaluate product classification, applicable rates, and compliance conditions to fully benefit from the exemption.
Conclusion
The latest customs notification reflects the government’s continued focus on rationalizing duties and supporting manufacturing under the SEZ framework. With its wide coverage and defined conditions, the move is likely to have a notable impact on trade flows between SEZ and DTA markets in the upcoming financial year.
CAclubindia
