SEZ to DTA Exemptions: A Complete Guide to Notification No. 11/2026-Customs

The Ministry of Finance recently issued Notification No. 11/2026-Customs, a significant update for businesses operating within Special Economic Zones (SEZs). This notification provides crucial exemptions on Basic Customs Duty (BCD) and Agriculture Infrastructure and Development Cess (AIDC) for goods manufactured in an SEZ and cleared into the Domestic Tariff Area (DTA).

Whether you are a logistics manager or a tax consultant, understanding these nuances is vital for maintaining compliance and optimizing your supply chain costs for the 2026-2027 financial year.

Key Highlights of the Notification

The primary goal of this notification is to streamline the tax burden on goods moving from SEZs to the domestic market, provided specific manufacturing and value-addition criteria are met.

• Effective Date: April 1, 2026.

• Validity: This notification remains in effect until March 31, 2027.

• Scope: Covers a vast range of tariff items across various chapters, offering reduced BCD rates (often between 5% and 12.5%).

Eligibility Criteria for SEZ Units

Not every SEZ unit can claim these benefits. To avail of the exemptions, your unit must satisfy the following:

1. Commencement of Production: The unit must have started production on or before March 31, 2025.

2. Exclusion Zones: This notification does not apply to units set up in Free Trade and Warehousing Zones (FTWZ).

3. Manufacturing Requirement: Goods must be manufactured within the SEZ. Simple repacking, labeling, or repair does not qualify as "manufacture" under this notification.

The 20% Value Addition Rule

A critical condition for this exemption is the minimum Value Addition (VA) of 20%. The notification provides a specific formula to calculate this:

Where:

• A: Assessable value of goods removed to the DTA.

• B: Total CIF value of all imported inputs used.

• C: Value of inputs procured from the DTA used in manufacture.

Note: Businesses must also ensure that the total value of goods cleared to the DTA does not exceed 30% of the highest annual FOB value of exports made by the unit in any of the three preceding financial years.

Breakdown of Exempted Goods

The notification includes two primary tables detailing the revised rates:

Table I: Basic Customs Duty (BCD)

This table covers hundreds of items, including chemicals, plastics, textiles, and machinery. Common rates include:

• 9% - 10% for various industrial goods and electronics.

• 12.5% for specific textile articles and luxury goods.

• 5% for certain medical devices and equipment.

Table II: BCD + AIDC Rates

Specific items like PVC Flex Films, Footwear (6401 to 6405), and Solar Lanterns are subject to both BCD and AIDC exemptions. For example, Solar Lanterns (9405 50 00) now carry a 10% BCD and a reduced 2.5% AIDC.

Compliance Checklist for DTA Clearances

To successfully claim the exemption at the time of removal, the SEZ unit must:

• File a Bill of Entry for home consumption on the common portal.

• Obtain a certificate from the jurisdictional Development Commissioner verifying the commencement date, export values, and VA achieved.

• Ensure no duty drawback or export benefits were claimed on the inputs used.

• Submit a declaration to pay full duty if any conditions are subsequently found to be unfulfilled.

Final Thoughts

Notification 11/2026-Customs offers a strategic advantage for well-established SEZ units looking to tap into the Indian domestic market. However, the strict 20% value addition and export-linked caps mean that rigorous documentation is non-negotiable.