The Central Government, in exercise of powers conferred under Section 3 read with Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (22 of 1992), read with Paragraph 1.02 of the Foreign Trade Policy (FTP) 2023, has issued Notification No. 16/2026-27 dated June 01, 2026, amending Para 2.03(A)(iii) of the FTP, 2023 with immediate effect. The notification has been issued by the Directorate General of Foreign Trade (DGFT), Vanijya Bhawan, New Delhi, with the approval of the Minister of Commerce & Industry.
Background and Purpose of the Amendment:
The existing Para 2.03A(iii) of FTP 2023 provided exemption from the applicability of mandatory Quality Control Orders (QCOs) issued under the BIS Act, 2016, only to SEZ units for import of inputs required for export production, with no DTA (Domestic Tariff Area) clearance of such inputs or goods manufactured therefrom being permitted. The exemption was restricted to physical exports only and was further subject to Para 2.03(c) of the FTP.
Key Changes Introduced by Notification No. 16/2026-27:
The revised Para 2.03A(iii) significantly broadens the scope of QCO exemption as under:
- Wider Coverage: The exemption from QCOs issued under the BIS Act, 2016, shall now be available to both SEZ Units and SEZ Developers (not just SEZ units as earlier).
- Expanded Scope of Goods: The exemption shall cover import of all permissible goods — including raw materials, components, consumables, spares, and capital goods — required for authorised operations within the SEZ, in accordance with the provisions of the SEZ Act, 2005 and Rule 27 of the SEZ Rules, 2006.
- Alignment with SEZ Framework: The amendment aligns the FTP provisions with the SEZ Act, 2005 and SEZ Rules, 2006, bringing much-needed clarity and consistency to the regulatory framework governing SEZ imports.
- Use Restricted to SEZ Operations: The exemption is applicable only for use of the imported goods within the SEZ for authorised operations.
- DTA Clearance Still Subject to QCO Compliance: Any removal, transfer, or clearance of such goods — or goods manufactured or processed therefrom — from the SEZ into the Domestic Tariff Area (DTA) shall continue to be subject to compliance with applicable QCOs, BIS requirements, and all other applicable laws, rules, and regulations in force at the time of such clearance.
- Undertaking Requirement: Both SEZ Units and SEZ Developers shall be required to submit an undertaking to the concerned Development Commissioner of the SEZ at the time of importation.
Effect of the Notification:
As stated in the notification, Para 2.03A(iii) of FTP 2023 is amended to align the provisions relating to exemption from applicability of QCOs for imports by SEZ Units and Developers with the provisions of the SEZ Act, 2005 and SEZ Rules, 2006, and to bring clarity regarding the applicability of QCOs. The amendment is expected to ease compliance burden, facilitate smoother import operations within SEZs, and encourage investment and manufacturing activities in Special Economic Zones.
Significance of the Amendment:
The amendment is a significant policy reform aimed at boosting ease of doing business within SEZs. By expanding the QCO exemption to cover all permissible goods required for authorised operations — and not merely inputs for export production — the government has provided SEZ Units and Developers with greater operational flexibility. The simultaneous safeguard ensuring that goods cleared into the DTA must comply with QCOs and BIS requirements ensures that domestic quality standards are not compromised.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/06/English-Notification-16-Adobe-cloud-storage.pdf
