Currently, Special Economic Zones (SEZs) have the privilege of selling their products in the Domestic Tariff Area (DTA) by paying duties based on the finished goods they produce.
The Global Trade Research Initiative (GTRI) has pointed out that the government already grants the option of DTA sales based on the duty foregone on input to companies operating under the ‘Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme.’
GTRI’s Co-Founder, Ajay Srivastava, suggests that providing the same concession to SEZs for the sake of fairness would promote value addition within these zones. In many cases, finished product tariffs are higher than those on inputs. This approach would incentivize SEZ units to increase value addition, fostering technological advancement and skill development.
SEZs are regarded as foreign territories for trade and duties, and they are subject to restrictions on duty-free domestic sales. Businesses within SEZs can import materials and components duty-free, provided that the finished goods are intended for export from India. When sold in the Indian domestic market, applicable output duties are levied.
Addressing the demand of SEZ units to sell their products in the domestic market without paying import duties, GTRI argues that this could distort the export focus and result in revenue loss for the government.
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