Special Economic Zone (SEZ)
A Special Economic Zone (SEZ) is a designated duty-free enclave in India that is treated, for authorised operations, as foreign territory. Units inside an SEZ can import goods free of customs duty, enjoy specified tax benefits, and operate under simplified procedures aimed at promoting exports and investment. SEZs are governed by the SEZ Act.
Crucially, supplies from the domestic tariff area (DTA) into an SEZ are treated as exports (zero-rated), and goods coming from an SEZ into the DTA are treated as imports and attract duty. This makes the SEZ boundary a customs frontier inside the country, which is why SEZ transactions have their own declarations and controls.
The SEZ regime lets export-oriented businesses import inputs and capital goods duty-free and operate with tax advantages — a major cost lever for manufacturing and IT/ITES exporters. But the SEZ boundary is a customs line: knowing when a transaction counts as an export or import is essential to getting the duty and GST treatment right.
Are supplies to an SEZ exports?
Yes — supplies from the domestic tariff area into an SEZ are treated as zero-rated exports.
What happens when SEZ goods enter the domestic market?
They are treated as imports into India and attract applicable customs duty and IGST.