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GST Registration
Margesh Rai
| Updated: 07 Jul, 2020 | Category: Goods and Service Tax

A Brief Take on Special Economic Zone- SEZ under GST

SEZ under GST
Reading Time: 3 minutes

Any supply to or by a unit of SEZ under GST would get acknowledged as an Inter-state supply & there will be the applicability of IGST or Integrated Goods and Supply tax. The spots for Special Economic Zones are within the national boundaries of the country. Although special economic zones exist within the same country, they would get considered as situated in a foreign nation. Units in a Special Economic Zone seek GST registration under the brand-new tax regime.

Those dedicated zones in which businesses have the privileges of simplified legal compliances along with uncomplicated tax provisions are known as Special Economic Zones. As compared to the regular supplies, the treatment for supply from and to Special Economic Zones or SEZ under GST is different. Furthermore, Special Economic Zones don’t get viewed as a part of India. SEZ’s objectives cover increased investment, an increase in employment opportunities, escalating job creation, growth in the trade balance, and proper administration.

Definition of SEZ under GST

In relation to the provisions of section 2(19) of IGST Act[1], the meaning of SEZ under GST as provided in the (clause za) – section 2 of the Special Economic Zones Act of 2005.

According to the provisions in clause za of section 2 of the Special Economic Zones Act of 2005, Special Economic Zone implies every Special Economic Zone declared under the proviso to section 3(4) and section 4 sub-sections 1 comprises Warehousing Zone and Free Trade and incorporates an existing Special Economic Zone.

Provisions Concerning SEZ under GST                         

In taxation related matters, being a part of Special Economic Zones can be fruitful up to an extent. The supply of goods or services or even both to either Special Economic Zone Unit or Special Economic Zone Developer would get considered as a zero-rated supply. It indicates that the supplies of such types would entice zero tax under goods and service tax.

In simple language, we can say that supplies into SEZ under GST got an exemption and also get considered as exports. Thus, the suppliers furnishing goods to Special Economic Zones can supply on IGST payment & claim refund of taxes paid. Furthermore, the suppliers furnishing goods to SEZs can supply under Letter of Undertaking or bond without IGST payment & claim credit of input tax credit.

If the Special Economic Zones supplies goods or services or even both, it will get considered as regular inter-state supply and would entice IGST. The exception associated with this is if a Special Economic Zone’s involvement is in supplying goods or services or even both of them to a DTA (Expanded as Domestic Tariff Area), this will get considered as export to Domestic Tariff Area (Exempted for the Special Economic Zone) & custom duties along with other Import duties would get viewed as payable by those people who receive these supplies in Domestic Tariff Area.

Export and Import Meaning With Respect to SEZ under GST

Since Special Economic Zones are deemed to exist in a foreign territory, transactions with Special Economic Zones would get listed as exports and imports.

Meaning of Export       

Export refers to taking goods or services outside India from an SEZ through any transportation mode or supply of goods or services from one Special Economic Zone Developer/Unit in the Special Economic Zone to a different Unit in either the same SEZ or another one.

Meaning of Import

Import refers to bringing goods or services into an SEZ from a location outside the boundaries of India by any transportation form or receiving goods or services from one Special Economic Zone Developer or Unit in the Special Economic Zone by another developer/unit situated in the same SEZ or another one.

E-Way Bill and SEZ

Transporters need to carry an E-Way Bill under GST at the time of transporting goods from one site to another if the value of transported goods exceeds Rs. 50,000. SEZ supplies get the treatment in the same way as the treatment of other inter-state supplies.

All the SEZ units or developers must follow the same E-Way Bill procedures in the same manner as others from the industry follows. In the matter of supplies from Special Economic Zones to a Domestic Tariff Area or other places, the registered person involved in the movement of goods will be responsible for E-Way Bill generation.

Example: Suppose that XYZ is a unit of Special Economic Zone situated in the state of Karnataka. Besides this, A is the recipient of goods produced by Special Economic Zone and is situated in Bangalore. Rs. 75000 is the value of transported goods. In this case, the goods have moved outside the Special Economic Zone. However, it has got transported inside the boundaries of the same Karnataka, and thus, it would get considered as an Inter-state supply, and for the supply of such a type, IGST will be applicable

Take Away

In comparison to the regular supplies, the treatment procedure for SEZ under GST is different. Special Economic Zone Developer/Unit can proceed ahead for undertaking authorized operations defined in the approval letter issued from the end of the Development Commissioner of SEZ. Services rendered to conduct authorized operations by Special Economic Zone are exempt. Our Corpbiz experts would assist you in the process of GST registration and guide you further in case you need our guidance.

Read our article: Synopsis of the Entire Mechanism of Advance Ruling under GST

Margesh Rai

Being a poetry lover, and an avid reader, Margesh is fanatical about legal content writing. After completing graduation in B.Com(H), he decided to follow his passion. Writing impeccable in-depth content about legal and finance-related topics is his biggest forte.

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