Budget 2026: SEZ dispensation modalities being finalised, says CBIC Chairman Vivek Chaturvedi

Vivek Chaturvedi, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), has said the government is working on modalities to address capacity utilisation issues in Special Economic Zones (SEZs), with inter-ministerial consultations currently underway.

Speaking exclusively to CNBC-TV18, Chaturvedi noted that the Finance Minister’s policy announcement is a “limited dispensation,” and the concessional rate for the one-time window is still being finalised.

On customs duty changes in Budget 2026, Chaturvedi described the approach as “calibrated and nuanced,” aimed at critical sectors such as energy security, defence maintenance, and export-focused industries. Key exemptions include inputs for nuclear power projects, solar glass manufacturing, lithium-ion cell production, and EV magnet components. Export-oriented measures include higher duty-free import limits for seafood processing and exemptions for leather shoe upper components.

Chaturvedi also explained reforms to reduce litigation by replacing the negative connotation of “penalty” with a charge for non-payment of duty. On GST, he highlighted a major relief for intermediary services, which will now qualify as exports when provided to foreign clients, removing the 18% tax burden.

He added that tariff rationalisation and clean-up of redundant exemptions will improve transparency, predictability, and compliance for trade.

Also Read | Budget 2026 SEZ push to spur import substitution, jobs: Commerce secretary

Below is the excerpt of the interview.

Chaturvedi: The issue of utilisation of capacities in the SEZ has been engaging the attention of the government.

The modalities will be worked out by the Department of Revenue, with inter-ministerial consultations with all the stakeholders.

Discussions on modalities are in process.

As far as the policy announcement is concerned, as the Finance Minister has already said, it is a limited dispensation.

So, the modalities are still being worked out, including the concessional rate that is being discussed for this particular window.

Q. What will the one-time measure be like? Will it be like a concession of, say, 5% or 10%—anything that is there in your mind?

Chaturvedi: No, as I said, let the modalities get worked out. I'm sure you'll get to know them soon.

Q. When we come to customs, a lot of BCD concessions were given out. A lot of basic customs duty exemptions have been put out. We understand on the rare diseases, on the autoimmune disease drugs. But what about the other areas?

Chaturvedi: It's a very calibrated and nuanced approach that the government has taken.

The broad thought behind that was to look at the sectors which are extremely critical for us—for example, energy security.

We have customs duty exemption for setting up a nuclear power plant, without any limit on the megawatt capacity that was there earlier.

But not only nuclear power.

It goes into various other areas. For example, there is a customs duty exemption on sodium antimonate that goes for the manufacture of solar glass panels.

So that is solar energy for you.

We have exemption for capital goods for use in the manufacture of lithium-ion cells, which go into battery energy storage systems.

We have a similar exemption announced for monazite, which is a very critical component for the manufacture of magnets that go into electric vehicles.

So the government has been looking at a very focused approach.

So a very conscious call is not only energy, but also, for example, defence—particularly the maintenance and repair operations in the defence area.

The government has provided an exemption for the raw material for the manufacture of parts which will go into maintenance.

Then on the export side, if you look at the marine sector, the seafood processing industry, there used to be a limitation that, based on whatever export value happened last year, a 1% FOB value limit was there for importing duty-free.

That limit has increased from 1% to 3% of the FOB value. This will give a boost to the seafood processing industry.

Again, if I may take a minute, leather shoe uppers are a very important item of export from India.

The components required for the manufacture of leather shoe uppers are now getting a customs duty exemption as well.

This will hopefully boost export efforts.

A very nuanced approach, giving protection to the domestic industry, has also been highlighted.

If you saw, umbrellas are largely an MSME product, and there was pressure of imports. So we have come up with a composite duty at 20% plus ₹60 per piece on an umbrella.

So measures have been very nuanced, industry-specific, sector-specific, given the criticality of that sector to the country.

Q. The customs amnesty scheme was much talked about, but the government did not come up with anything. What kept you holding back from coming up with a customs amnesty scheme?

Chaturvedi: If you look at how the Customs Act operates, when an assessee is given a show cause notice and a determination is made by the proper officer towards payment of duty and a fine, it also includes a penalty component.

Now the penalty has a slightly negative connotation, because if you are penalised, you have to make disclosures to other entities about having undergone a penalty.

It is a deterrent, even for certain assessees who might not want to litigate the case on facts, but only on penalties.

We have noticed that people have been filing appeals, so we have tried to do away with the negative connotation by changing it.

We want to see that when the determination is made by the proper officer, the negative connotation behind penalty is changed to a charge for non-payment of duty.

So that is what we have done so far.

Of course, we are conscious of the fact that there is litigation and revenue blocked up at various levels, from Commissioner (Appeals) to CESTAT to High Courts.

Q. On the change in the definition of intermediaries.

Chaturvedi: Basically, what are intermediary services? Intermediary services are largely defined as facilitating the supply of goods and securities, but not supplying on one's own account.

These were being taxed at around 18% GST because they were deemed to be consumed in India.

So now what we have brought out is the deletion of the particular section which previously deemed that the place of supply of intermediary services would be the location of the supplier.

Now, with this change, the place of supply will follow the default rule under Section 13(2), which is the location of the recipient.

So when the location of the recipient becomes the place of supply, the services provided by Indian intermediaries like brokers and agents to foreign clients—for example, foreign portfolio investors—will now qualify as an export of services.

Therefore, they will not attract the 18% GST.

Q. On parity for domestic industry vis-à-vis FTAs.

Chaturvedi: Well, FTAs are a fact of life. It's a reality. It's a conscious policy call with the Government of India to enter into FTAs.

Now what happens in FTAs is that finished products, when they come into the Indian market, get preferential access on rates.

Of course, the domestic industry is factored in at the time of making concessions, because these are reciprocal concessions.

But to answer your point, most of the measures that the government has been taking, particularly on providing concessions of basic customs duties on imports of raw materials and inputs, are designed largely to ensure that Indian industry gets a helping hand to stand up to competition, be more resilient, and be more agile.

Competition will obviously be there—that's the law of economics.

So while Indian industry would need that degree of comfort by way of concessions, at the end of the day it is also about how competitive and resilient they are, and how much advantage they take out of that so that they are able to compete shoulder to shoulder and head to head with finished products coming in through FTAs.

Q. Overall rationalisation on the customs side, especially tariffs, is still pending. What kept you holding back?

Chaturvedi: In the last Union Budget, if you see, the tariff slabs are eight as of now.

What we have done in this budget exercise is a lot of tariffisation of our existing entries.

For example, you have conditional or unconditional exemption notifications where imports have been happening for quite a period of time. You also have a schedule of customs where a tariff rate is prescribed.

We have moved away those exemption notification rates into the tariff, so a lower rate has now become a tariff rate.

We have created new tariff lines also for ease of classification, to remove classification disputes, reduce ambiguity, and give far more ease of compliance for trade.

We also reviewed a lot of exemption notifications and entries which have become redundant. No imports were being noticed.

So a lot of clean-up has also happened.

That, I am sure, from the perspective of trade, will give a certain degree of transparency, predictability, and certainty when they plan their long- and medium-term business interests.