Budget 2026-2027 may announce SEZ reforms to boost exports and domestic sales

The government is considering announcing a reform package for the Special Economic Zone (SEZ) in the 2026-2027 budget to boost industry competitiveness and help exporters tap the domestic market amid global uncertainty and US tariffs. | Photo credit: DEEPAK KR/THE HINDU

Discussions are currently underway between the commerce and revenue ministries, focusing on proposed flexibilities such as easier access to the domestic market, introducing reverse employment and allowing INR payments for services provided by SEZs to domestic units, a source following the matter told Businessline.

Budget roadmap for reforms

“The government has been working on SEZ reforms for a long time and there have been many inter-ministerial discussions on many of the proposals pushed by the SEZs and supported by the Ministry of Commerce. Since the tabling of the SEZ Amendment Bill has not yet been possible due to several delays despite several attempts by the Ministry of Commerce, the intention is to expedite the reforms through a budget announcement,” the source said.

DTA sales question

SEZs have long demanded that units be allowed to be sold in the DTA (Domestic Tariff Area) on a ‘foregone duty’ basis to reduce the burden of import duties. This would mean that their duties owed should be based on the duties on the raw materials used to manufacture these goods, and not on the customs duties on the final product.

Parity with FTA partners

The argument of the Export Promotion Council for EOUs and SEZs is that giving duty exemption to SEZ units will bring them on par with FTA partner countries – for example the ASEAN bloc – that sell their goods duty-free in the Indian market.

Work proposal for a job

Another requirement that will be prioritized in the budget is to enable SEZ exporters to do “jobs” for domestic customers. “This would help utilize expensive machinery and idle capacities and keep skilled workers employed when global demand is low,” the source explained.

INR payments for services

A third requirement is that SEZ service units be allowed to accept INR payments for services provided to DTA units. “Domestic units wanting to avail services from SEZ service providers are often restricted by the rule requiring payments to be made in foreign currency. If INR payments are allowed, it will boost demand,” the source said.

Built-in protections

All proposals will include safeguards to address concerns of other ministries and departments, the source added.

“The proposed SEZ reforms, which also include ease of doing business measures and overhaul of the SEZ framework, are also seen as mitigating the effects of the Trump tariffs,” the source said.

Domestic market pressure

After US President Donald Trump imposed 50 percent tariffs on most Indian exports, the government wants to make more use of the domestic market for exporters.

SEZ employment base

According to government figures, there are over 276 operational SEZs that employ over 31,94,104 people.

Exports from SEZ units were valued at $ in 2024-25, up 7.37 per cent over the previous fiscal.

Published on January 19, 2026