The government amended the Special Economic Zone Rules, 2006, on October 15 to allow units to reclaim undelivered goods. Units must bring back rejected items within 30 days of clearance. They can resell these goods in the domestic market after paying duty. This change helps businesses manage inventory pile-ups effectively.
Govt amends SEZ rules to allow return of goods rejected by domestic buyers (Representative image from file)
Earlier this week, the government amended the Special Economic Zone (SEZ) Rules, 2006, allowing SEZ units to bring back duty-paid goods that domestic buyers fail to accept under specified conditions and resell them in the domestic market. The change is aimed at addressing inventory pile-ups when buyers refuse delivery because of changes in fashion, market conditions or a breach of sale terms.
The Ministry of Commerce and Industry notified the Special Economic Zones (Third Amendment) Rules, 2026, on October 15, amending Rule 49(2) of the SEZ Rules, 2006.
What the amended rules allow
Under the revised rules, SEZ units must bring back goods rejected by domestic tariff area (DTA) buyers within 30 days of clearance from the SEZ.
The unit must establish the identity of the returned goods to the satisfaction of the specified officer and provide evidence that the buyer has not availed any benefits, including input tax credit, the notification said.
Units must also maintain a separate inventory of returned goods in an auditable format, it added.
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The amendment permits units to resell the goods in their original condition to the same buyer or another buyer in the DTA. The resale will be treated as a fresh domestic sale, subject to payment of the applicable duty under Section 30 of the SEZ Act.
Units can separately seek a refund of the duty paid at the time of the original clearance under Rule 47(5). Refunds on goods received back will be governed by the Customs Act, 1962.
Relief for manufacturers, but with limits
The amendment addresses a gap in the rules governing goods supplied by SEZ units to the domestic market. Earlier, the rules provided for goods to be brought back for repairs, but did not provide the same explicit route when a domestic buyer failed to take delivery.
Somesh Jain of Sachdev & Jain, Advocates, who specialises in taxation, regulatory and commercial laws, told Business Standard, "The substituted Rule 49(2) of the SEZ Rules addresses a long-standing gap. Hitherto, the Rules provided for bringing back DTA-cleared goods only for repair, not where the buyer declined delivery. SEZ manufacturers may now reclaim such goods and resell them in original condition, to the same or another buyer, easing inventory pile-ups and potential write-offs."
However, the relief applies only to specified circumstances. "The relief is, however, narrow. It applies only to goods brought back on the buyer's failure to take delivery owing to change in fashion, market conditions or breach of sale terms, and not to every return. The 30-day window from clearance is also unduly short," Jain said.
According to the notification, the amendment also permits goods supplied to the DTA to be returned to the SEZ unit for repairs. Such goods must be brought back within six months of clearance, any extended period approved by the specified officer or the warranty period, whichever is later. Duty will be payable on the value of the repairs, subject to the requirement that the identity of the goods is established.
Duty refunds remain a working-capital concern
According to Jain, the amendment requires SEZ units to pay applicable duty on resale and seek a separate refund of the duty paid at the original clearance.
The time taken to process refunds could therefore affect the extent to which manufacturers benefit from the revised rules, he added.