Clarification on Drawback for Re-Export of Duty Paid Goods Supplied by SEZ to DTA

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Dated: 28.04.2026

Clarification on Drawback for Re-Export of Duty Paid Goods Supplied by SEZ to DTA

The Central Board of Indirect Taxes & Customs (CBIC) has issued a significant clarification regarding the eligibility for duty drawback under Section 74 of the Customs Act, 1962, for goods supplied from Special Economic Zones (SEZ) to the Domestic Tariff Area (DTA) and subsequently re-exported.

This article provides a comprehensive overview of the clarification, its legal basis, and its implications for businesses operating in SEZs and DTAs.

Background

Recent audits highlighted inconsistencies in how customs authorities processed duty drawback claims for goods cleared from SEZs to DTAs and then re-exported. Some customs field formations denied drawback claims, arguing that such clearances did not constitute imports, leading to confusion and operational challenges for businesses.

Legal Framework

1. SEZ Act, 2005

Section 30: Goods removed from an SEZ into the DTA attract customs duties, including anti-dumping, countervailing, and safeguard duties, as per the Customs Tariff Act, 1975. The applicable duty rate and valuation are determined on the date of removal from the SEZ or, if not ascertainable, on the date of duty payment.
Section 2(o): Defines ‘import’ in the SEZ context as bringing goods into an SEZ from outside India or from another SEZ.

2. Customs Act, 1962

Section 74: Allows for duty drawback on re-exported goods that were previously imported into India and are easily identifiable.

Key Clarification by CBIC

The CBIC has clarified that:

SEZ as Foreign Territory: For customs and trade operations, SEZs are treated as foreign territory within India. Thus, movement of goods from an SEZ to the DTA is considered an import.
Eligibility for Drawback: Goods cleared from an SEZ to the DTA on payment of applicable duties, and subsequently re-exported, fulfill the conditions of Section 74 of the Customs Act. These goods are to be treated as imported for the purpose of drawback claims.
Uniform Practice Mandated: All customs formations must process drawback claims for such re-exported goods in accordance with this clarification, ensuring consistency and legal compliance.

Practical Implications

For DTA Units: Businesses in the DTA that purchase goods from SEZs, pay the applicable duties, and later re-export these goods can now confidently claim duty drawback under Section 74, provided the goods are easily identifiable.
For SEZ Units: This clarification enhances the attractiveness of SEZs as a source for DTA units, knowing that the drawback mechanism is available upon re-export.
For Customs Authorities: Field formations must align their practices with this clarification, eliminating previous inconsistencies and reducing disputes.

Example Scenario

A DTA unit purchases machinery from an SEZ, pays the required customs duties, and later re-exports the machinery to a foreign buyer.
The DTA unit can claim duty drawback under Section 74, as the machinery is treated as imported into India from the SEZ and is easily identifiable.

Conclusion

This CBIC clarification streamlines the process for claiming duty drawback on goods supplied from SEZs to DTAs and then re-exported. It ensures legal certainty, operational consistency, and supports India’s export competitiveness by removing ambiguity in the application of Section 74 of the Customs Act, 1962.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

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Source: CBIC, Ministry of Finance, Govt. of India

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