The Central Board of Indirect Taxes and Customs (CBIC) has clarified that when goods are supplied from SEZ units to the domestic market after paying applicable duties and later re-exported, they will be treated as imported goods for the purposes of disbursement of duty drawback.
In an instruction to its field formation, the Board took note of Section 74 of the Customs Act. According to the said section, drawback is admissible on the re-export of duty-paid goods, provided the goods are capable of being easily identified and were previously imported into India. The key expressions in this context are “easily identified” and “imported into India”.
The term ‘easily-identified’ implies that the goods can be readily recognised, while ‘import’, as defined under the Act, with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India. “It is pertinent to note that for the purposes of trade operations and duties, a Special Economic Zone (SEZ) is treated as foreign territory within India. Therefore, movement of goods from an SEZ into the DTA may be construed as an import,” the instruction said.
Uniform treatment
According to Ikesh Nagpal, Lead-Indirect Tax at AKM Global, in practice, drawback claims on re-export of such goods were being handled differently across formations, with some allowing the benefit and others denying it on the ground that these were not imports.
By way of this instruction, the Board has legally settled the position by instructing that since SEZ is treated as foreign territory for customs purposes, movement of goods from SEZ to DTA must be regarded as import, and consequently, eligible for drawback under Section 74 when re-exported. “This should help bring consistency in assessments, reduce avoidable disputes, and ease cash flow issues for businesses dealing in re-export transactions,” he said.
Commenting on the move, think tank GTRI said by treating duty-paid goods supplied from SEZs to the DTA as imported goods for the purpose of refund under Section 74 when they are later re-exported, the instruction removes an unnecessary ambiguity that had led to different practices across customs formations.
“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,” GTRI Founder Ajay Srivastava said. Further, he added that the change supports fairness, improves cash flows, and provides greater certainty to DTA buyers, exporters, and SEZ suppliers.
Published on April 28, 2026