The government has clarified that goods supplied from Special Economic Zone (SEZ) units to the domestic market after payment of applicable duties, and subsequently re-exported, will be treated as imported goods for the purpose of duty drawback.
In an instruction issued by the Central Board of Indirect Taxes and Customs (CBIC), it was stated that goods cleared from SEZ units to the Domestic Tariff Area (DTA) on payment of customs duties will qualify as imported goods if they are later re-exported.
The CBIC noted that audits had revealed inconsistent practices among customs authorities in processing duty drawback claims filed by DTA units under customs law. It pointed out that certain field formations were not treating SEZ-to-DTA clearances as imports, resulting in denial of drawback benefits under Customs Act, 1962. “…it is hereby clarified that in cases where goods are cleared into DTA from SEZ unit on payment of applicable duties and are re-exported thereafter are to be treated as imported goods for the purposes of disbursement of drawback under Section 74 of the Customs Act, 1962,” the CBIC said.
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Commenting on the clarification, think tank Global Trade Research Initiative (GTRI) termed it a fair and welcome move. It said that by treating duty-paid goods supplied from SEZs to the DTA as imported goods for refund purposes under Section 74 when re-exported, the instruction removes ambiguity that had led to varied interpretations across customs offices.
“It will bring uniformity, reduce litigation, and ensure justice for exporters who have already paid applicable customs duties. There is no reason such duties should remain locked when the same identifiable goods are exported again,” said Ajay Srivastava, Founder of GTRI.
He added that the move promotes fairness, enhances cash flow, and provides greater certainty to DTA buyers, exporters, and SEZ suppliers. The Federation of Indian Export Organisations (FIEO) also welcomed the decision, stating that it offers much-needed clarity on the eligibility of duty drawback for re-exported goods supplied by SEZ units to the DTA.
“By aligning the treatment with import principles and permitting drawback under Section 74, it removes long-standing ambiguity and supports exporters’ liquidity. We welcome this pragmatic step and urge uniform, facilitative implementation at the field level to fully realise its benefits for exporters, especially MSMEs,” FIEO said.
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