New rules allow SEZ units to retrieve and resell duty-paid goods refused by domestic buyers, while requiring proof of identity and leaving manufacturers to pursue a separate duty refund.
The Indian government has widened the Special Economic Zone rules to give manufacturers a clearer route for dealing with duty-paid goods that domestic buyers refuse to take, while keeping tight limits on how the relief works. According to the Ministry of Commerce and Industry’s notification issued on 15 October, SEZ units may now take back such goods from the domestic tariff area and resell them, provided the buyer never accepted delivery and the return is made within 30 days of clearance from the zone.
The change is intended to address a practical problem for manufacturers when orders collapse because of shifting fashion trends, changing market conditions or a breach of sale terms. Business Standard reported that the previous framework only dealt explicitly with goods sent back for repair, leaving a gap when a domestic buyer simply declined delivery. Under the revised rules, the unit must prove the identity of the returned goods to the satisfaction of the specified officer and show that the buyer did not claim any benefit, including input tax credit.
The goods can then be sold again in their original condition to the same buyer or to a different buyer in the domestic market. That second sale is treated as a fresh domestic transaction and attracts the applicable duty under Section 30 of the SEZ Act. At the same time, the unit may apply separately for a refund of the duty it paid when the goods first left the zone. According to tax practitioners cited by Business Standard, that refund mechanism could leave manufacturers facing a working-capital squeeze if the reimbursement takes time to come through.
The amendment also formalises the process for goods returned to an SEZ unit for repair. These items must come back within six months of clearance, unless the specified officer grants more time or the warranty period runs longer, whichever is later. Duty is payable on the value of the repairs, and the identity of the goods must again be established. Legal and tax commentators say the revision closes a long-standing gap in the rules, but they also note that the relief is narrowly drawn and that the 30-day deadline for rejected goods may prove restrictive for some businesses.
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