Duty Drawback on Re-export of SEZ to DTA Supplies: CBIC Clarifies Position
The Central Board of Indirect Taxes and Customs has issued an important clarification addressing inconsistencies in the treatment of duty drawback claims under Section 74 of the Customs Act, 1962 for goods supplied from Special Economic Zones (SEZ) to Domestic Tariff Area (DTA) and subsequently re-exported.
This clarification resolves a key interpretational issue that had led to denial of drawback benefits in several cases.
Background of the Issue
The matter originated from Audit Para 5.8 of Audit Report 33 of 2025, where it was observed that different customs formations were following divergent practices in processing drawback claims.
In several instances, authorities did not consider supplies from SEZ to DTA as “imports,” resulting in rejection of drawback claims filed under Section 74 of the Customs Act, 1962.
This created uncertainty and litigation risk for businesses engaged in re-export transactions.
Legal Provisions Governing SEZ to DTA Supplies
As per Section 30 of the SEZ Act, 2005, goods cleared from SEZ into DTA are subject to applicable customs duties, including duties under the Customs Tariff Act, 1975.
The rate of duty applicable is the rate in force on the date of removal of goods from SEZ, or the date of payment where removal date is not ascertainable.
Further, Section 2(o) of the SEZ Act, 2005 defines “import” in a manner that treats SEZ as a distinct territory for trade operations, reinforcing its status as a deemed foreign territory.
Conditions under Section 74 of the Customs Act, 1962
Section 74 provides for duty drawback on re-export of goods that were earlier imported into India.
The key conditions include that the goods must be capable of being easily identified and must have been previously imported.
The interpretational issue revolved around whether goods cleared from SEZ to DTA can be considered as “imported goods” for this purpose.
CBIC Clarification and Final Position
The CBIC has clarified that SEZ is treated as a foreign territory for trade and duty purposes.
Accordingly, movement of goods from SEZ to DTA can be construed as import.
Therefore, where goods are cleared into DTA on payment of applicable duties and are subsequently re-exported, such goods shall qualify as imported goods for the purpose of Section 74. Consequently, duty drawback under Section 74 of the Customs Act, 1962 shall be admissible in such cases.
Practical Implications for Businesses
This clarification brings uniformity in the processing of drawback claims and removes ambiguity faced by exporters and traders.
Businesses engaged in re-export of SEZ-origin goods can now legitimately claim drawback benefits, improving overall cost efficiency.
It also reduces litigation exposure and ensures smoother compliance with customs authorities.
Proper documentation, traceability of goods, and clear identification remain critical to successfully claim the benefit.
Conclusion
The clarification aligns legal interpretation with practical trade operations and reinforces the principle that SEZ functions as a deemed foreign territory.
By recognizing SEZ to DTA movement as import for drawback purposes, the CBIC has provided significant relief to the trade.
Businesses should review their past and ongoing transactions to ensure they are availing eligible benefits under Section 74.