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India has eased rules to let Special Economic Zone (SEZ) units sell more in the domestic market at slightly lower customs duties, offering a limited cushion to exporters grappling with weak global demand.
The change, notified on March 31 and effective through March 2027, trims Basic Customs Duty (BCD) and, in some cases, the Agriculture Infrastructure and Development Cess (AIDC) on a wide basket of goods—from textiles and footwear to chemicals and machinery.
But the relief is narrow. The Integrated Goods and Services Tax (IGST) remains untouched, and key fuels—petrol and diesel—are excluded, leaving refinery-linked SEZs with little to gain.
Eligibility rules are tight. Units must have started production by March 31, 2025, achieve at least 20% value addition, and cap domestic sales at 30% of their peak export performance over the past three years. Audits will apply.
Ajay Srivastava of the Global Trade Research Initiative (GTRI) said the move, while signaling policy flexibility, is unlikely to shift the needle.
“The duty cut is small—around 1 percentage point for many products—and there is no IGST relief. That limits the incentive,” he said. “Add to that the 20% value-add rule and the 30% sales cap, and flexibility is constrained.”
He also flagged the exclusion of fuels as a key gap. “Leaving out petrol and diesel weakens the policy, especially for refinery-linked SEZs,” Srivastava said, adding that stronger steps—such as curbing exports of petrol, diesel and aviation turbine fuel, as seen in China and Singapore—would be needed to meaningfully boost domestic supply.
For now, the government’s move appears calibrated rather than bold—offering incremental relief without altering the underlying economics for most SEZ players.
