The Central Board of Indirect Taxes and Customs (CBIC) has clarified that goods cleared from Special Economic Zone (SEZ) units to the Domestic Tariff Area (DTA) on payment of applicable duties, and subsequently re-exported, will be treated as “imported goods” for the purpose of duty drawback under Section 74 of the Customs Act, 1962.
The clarification, issued through a notification dated April 27, comes amid divergent practices across customs field formations, with some allowing such claims and others rejecting them on the ground that SEZ-to-DTA clearances do not constitute imports.
“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 notification said.
Under Section 74, drawback is allowed on re-export of imported goods subject to conditions such as easy identification and proof of duty payment. The Board has now clarified that goods sourced from SEZ units on payment of duties meet this threshold.
According to the notification, the instruction addresses audit objections that had highlighted inconsistent positions taken by field formations. It noted that the Board has relied on provisions of the Special Economic Zones Act, particularly Sections 2(o) and 30, to underline that SEZs are treated as foreign territory for trade and duty purposes, and that, on a combined reading, there appears to be no gap in the legal framework on the issue.
Abhishek A Rastogi, founder of Rastogi Chambers, said the clarification effectively settles the position that goods moving from SEZ to DTA qualify as imports, and therefore meet the basic condition for drawback when re-exported. He added that as long as such goods are duty-paid and capable of being identified, they would be eligible under Section 74.
“The move is expected to bring uniformity in implementation, reduce litigation, and ease cash flows for exporters and DTA units sourcing goods from SEZs,” added Rastogi.
Ikesh Nagpal, Lead – Indirect Tax, AKM Global, a tax and consulting firm, said, “The CBIC’s latest instruction brings welcome clarity on SEZ to DTA clearances. 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.”
“This should help bring consistency in assessments, reduce avoidable disputes, and ease cash flow issues for businesses dealing in re-export transactions.”
