Duty relief to SEZs allows limited domestic sales without diluting export focus: Experts

New Delhi: The one-time duty concession to manufacturing units in SEZs will provide them with limited domestic market access while preserving their export-oriented character, experts said on Friday.

However, the relatively modest duty relief somewhat diminishes the extent of the potential benefits to these special economic zones (SEZs), as it is not structured around the principle of duty forgone, they added.

“Consequently, the measure falls short of fully addressing the import substitution objective or significantly incentivising domestic procurement by SEZ units for manufacturing for DTA (domestic tariff area) requirements,” Gulzar Didwania, Partner, Deloitte India, said.

He added that the measure reflects a nuanced shift in India’s export strategy that is allowing limited domestic market access to SEZ units while preserving their export-oriented character.

“The relief provides much-needed cushion for SEZ units facing under-utilised capacity and demand volatility in export markets. By enabling calibrated access to the domestic market at concessional duty rates, it supports better capacity utilisation and revenue realisation,” he said.

Didwania said that sectors with high export dependence, such as electronics, engineering goods, and textiles, are likely to benefit the most from this measure if implemented in a simpler manner.

“These industries can leverage the flexibility to offset global demand fluctuations through domestic sales. Conversely, excluded sectors, such as food, animal husbandry, precious metal and jewellery industry, nickel articles may see limited benefit, indicating a conscious effort to protect sensitive domestic industries,” he said.

Apparel Export Promotion Council (AEPC) Chairman A Sakthivel stated that the measure comes at a crucial time for the industry and will help ease cost pressures, improve liquidity, and support production continuity for textile and apparel exporters.

“The measure is especially important for textile and apparel exporters who are currently facing rising input costs, pricing pressures, and uncertain global demand,” he said.

By enabling concessional duty on goods cleared into the domestic market, the relief will help manufacturers better manage inventories and utilise capacities more efficiently, Sakthivel added.

The government has announced limited duty concessions to special economic zones (SEZs) for one year to help manufacturing units of these enclaves, hit by weak global demand, sell their goods in the domestic market. The measure takes effect from April 1 and will remain valid until March 31, 2027.