GST applicability on Supply of Goods to SEZ unit

gst-applicability-on-supply-of-goods-to-sez-unit

As we all know, GST, one of the major reform in India, was made applicable from July 1st . Since its implementation there are many unexplored topics by the professionals which requires concern for special category of businessman i.e SEZ.  It is one of the major categories in which, claim for refund may arise. All supplies made to SEZ whether on account of supplies of goods or services, have been categorised as “Zero Rated Supplies” in the IGST Act.

Meaning

As per section 2(19) of IGST Act, Special economic Zone shall have same meaning as assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005.

In common paralance, SEZ is a specially designated area which is duty-free for the purpose of promotion of goods and services to enhance economic activities, promotion of export and investment, development of infrastructure, the creation of employment opportunities and so on.

GST Applicability- Zero Rated Supply

  1. As per section 8 of IGST Act, Supply of goods and services to special economic zone shall not be treated as intra state supply .
  2. Section 16(1) of IGST Act prescribed that supply to SEZ is treated would be “zero rated supply“.
  3. Credit of Input Tax can be availed for making Zero- rated supplies.

Ways of suppling Goods or Services under “Zero rated supply” to SEZ

As per section 16(3), a registered person making “Zero rated supply” shall be eligible to claim refund under either of the following options-

  1. he may supply goods or services or both under bond or Letter of Undertaking, without payment of integrated tax and claim refund of unutilised input tax credit.
  2. he may supply goods or services or both, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied.

Who can apply for Refund

Rule 89 of CGST Act says that the application for refund in respect of supplies to SEZ shall be filled by the –

  1. Supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone.
  2. Supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone.

Refund of Integrated tax paid on supply of goods or services under bond or Letter of undertaking

Rule 96A of CGST rules says, any registered person availing the option to supply goods or services to SEZ without payment of integrated tax shall furnish, prior to supply, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner.

Conclusion

After gone through this, we can conclude that there is two option of supplying goods to SEZ, first one is supplying goods and services after payment of IGST and claim refund later on and other one is supplying under LUT without payment of IGST.

 

Disclaimer – the above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.

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