Refund of unutilised input tax credit for SEZ supplies must be claimed by the supplier under the prescribed refund scheme.

Refund of unutilised input tax credit for zero-rated supplies to a Special Economic Zone is regulated by the statutory refund scheme and the prescribed rules. Section 54(3) allows refund only in specified situations, while the refund mechanism under Rule 89 places supplier-side claims for supplies to SEZ units or developers on the supplier, supported by the declaration that tax has not been collected from the SEZ recipient. Read with the IGST framework and Rule 89, the scheme distinguishes between refunds claimed by suppliers and claims advanced by the SEZ unit itself. On that basis, the SEZ unit's refund claim was treated as not maintainable and the rejection was upheld.

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Issues: Whether the refund claim for unutilised input tax credit was admissible to the SEZ unit exporting goods without payment of integrated tax, or whether the refund was confined to suppliers making supplies to SEZ units/developers with payment of tax.

Analysis: Section 54(3) permits refund of unutilised input tax credit only in specified cases, including zero-rated supplies made without payment of tax. However, the refund mechanism under Rule 89(1) for supplies to a Special Economic Zone unit or developer places the refund claim on the supplier, and Rule 89(2)(f) requires a declaration that tax has not been collected from the SEZ unit or developer in such supplier-side refund claims. Reading Section 54(3), Section 16 of the Integrated Goods and Services Tax Act, 2017, and Rule 89 together, the refund scheme was held to distinguish between refunds claimable by suppliers to SEZ and the claim advanced by the SEZ unit itself. The appellate authority found that the appellant, being the SEZ unit, could not claim refund on the basis urged.

Conclusion: The refund claim by the SEZ unit was held not maintainable, and the rejection of refund was upheld.

Ratio Decidendi: Under the refund framework for zero-rated supplies and SEZ transactions, refund of unutilised input tax credit for supplies to an SEZ unit is claimable by the supplier in the manner prescribed, and not by the SEZ unit on the same basis.

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