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The Global Trade Research Initiative (GTRI) has said that the government should consider allowing the sale of products manufactured in Special Economic Zones (SEZs) in the domestic market on payment of duty foregone on inputs as that would help promote value addition. At present, units in SEZs are allowed to sell their products in the Domestic Tariff Area (DTA or domestic market) on payment of duties on an output basis (finished goods).

The GTRI said the government already allows DTA sales on payment of duty foregone on input basis to firms operating under the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme. The government can extend the same concession to the SEZs for parity sake. This will encourage value addition within the SEZ, as in most cases, the tariff on finished products is higher than on inputs.

On demand of units in SEZs that they should be permitted to sell their products in the domestic market without paying import duties, it said this would distort the export focus as well as lead to a loss of revenue for the government. SEZ units are intended to be export-oriented. If goods from SEZs are allowed into the DTA on the same terms as free trade agreement imports, this might disincentivise exports and turn these zones into back doors for importing goods duty-free for the domestic market, defeating the purpose of having export-focused zones.