Goods Moved from SEZs to Domestic Markets Classified as Imports, Entitled to Duty Drawback on Re-export

Government Clarifies Duty Drawback Rules for SEZ Units

The Central Board of Indirect Taxes and Customs (CBIC) has issued an instruction to customs authorities to clarify the rules governing duty drawback claims filed by Domestic Tariff Area (DTA) units under Customs law.

According to the instruction, goods supplied by a Special Economic Zone (SEZ) unit to the DTA after payment of customs duties will be treated as imported goods if later re-exported. This clarification aims to remove an unnecessary ambiguity that had led to different practices across customs formations.

The CBIC's move is a welcome development for exporters, who have been facing uncertainty over the eligibility of duty drawback for re-exports of goods supplied by SEZ units to the DTA. The Federation of Indian Export Organisations (FIEO) has applauded the decision, saying it provides much-needed clarity on the eligibility of duty drawback and removes long-standing ambiguity.

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The instruction is intended to bring uniformity in the processing of duty drawback claims and reduce litigation. By treating duty-paid goods supplied from SEZs to the DTA as imported goods for the purpose of refund under Section 74 of the drawback rules when they are later re-exported, the instruction supports fairness, improves cash flows, and provides greater certainty to DTA buyers, exporters, and SEZ suppliers.

Comparison of Duty Drawback Claims Processing

The CBIC's instruction has been welcomed by think tank GTRI, which said it is a fair clarification that will bring uniformity and reduce litigation. GTRI Founder Ajay Srivastava added that the change supports fairness, improves cash flows, and provides greater certainty to DTA buyers, exporters, and SEZ suppliers.

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The government's move is expected to benefit exporters, particularly Micro, Small, and Medium Enterprises (MSMEs), by removing uncertainty over duty drawback claims.