SUPPLY TO SEZ WITH IGST WITHIN SAME STATE ACCEPTABLE

[nandankumar roy]

DEAR SIR,

TO AVOID BOND WE HAVE SUPPLIED TO SEZ UNIT WITH IGST WITHIN SAME STATE. WHETHER IT WILL BE CREATE ANY PROBLEM IN RETURN AND SALES IS ONLY YRLY 12 LACS APPX. PL HELP.

N K ROY

[Rajagopalan Ranganathan]

Sir,

According to Section 2 (m) (ii) of THE SPECIAL ECONOMIC ZONES ACT, 2005“export” means supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer. Therefore any supply made to SEZ is treated as export and liable to pay IGST. Therefore your supply on payment of IGST even though the supply is within the same State is in order. For detailed procedure for export please see Circular No. 8/8/2017-GST dated 4.10.2017 issued by CBEC which is available in TMI web site.

[nandankumar roy]

THANKS SIRJI,

ROY

[KASTURI SETHI]

Excellent reply by Sh.Ranganathan Sir. To the point.

[Himansu Sekhar]

Absolutely correct sir.

[Chhatra Jain]

As section 16 of IGST Act clearly states that though in the same state supply to SEZ will be treated as inter state supply and one has to charge IGST. Section 16 of IGST Act is reproduced, for your reference, hereunder :

According to GST Law, supply of goods to SEZ is treated as zero rated supply.

The Section 16 of the IGST Act, 2017 explains zero rated supply as below:

“zero rated supply” means any of the following supplies of goods or services or both, namely:––

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies,notwithstanding that such supply may be an exempt supply.

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of Undertaking,subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or

(b) he may supply goods or services or both, subject to such conditions,safeguards and procedure as may be prescribed, on payment of integrated tax andclaim refund of such tax paid on goods or services or both supplied,in accordance with the provisions of section 54 of the Central Goods and Services Tax Actor the rules made there under.

So from above it will not create any problem.

[Kishan Barai]

In exercise of the powers conferred by section 54 of the Central Goods and Services Tax Act, 2017, and section 20 of the Integrated Goods and Services Tax Act, 2017, sub-rule (5) of rule 96A of the Central Goods and Services Tax Rules, 2017, and in supersession of notification No. 16/2017- Central Tax, dated the 7^thJuly, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 848 (E), dated the 7^th July, 2017 except as respects things done or omitted to be done before such supersession, the Central Board of Excise and Customs hereby specifies conditions and safeguards for furnishing a Letter of Undertaking in place of a Bond by a registered person who intends to supply goods or services for export without payment of integrated tax -

(i) all registered persons who intend to supply goods or services for export without payment of integrated tax shall be eligible to furnish a Letter of Undertaking in place of a bond except those who have been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or any of the existing laws in force in a case where the amount of tax evaded exceeds two hundred and fifty lakh rupees;

(ii) the Letter of Undertaking shall be furnished on the letter head of the registered person, in duplicate, for a financial year in the annexure to FORM GST RFD – 11 referred to in sub-rule (1) of rule 96A of the Central Goods and Services Tax Rules, 2017 and it shall be executed by the working partner, the Managing Director or the Company Secretary or the proprietor or by a person duly authorised by such working partner or Board of Directors of such company or proprietor;

(iii) where the registered person fails to pay the tax due along with interest, as specified under sub-rule (1) of rule 96A of Central Goods and Services Tax Rules, 2017, within the period mentioned in clause (a) or clause (b) of the said sub-rule, the facility of export without payment of integrated tax will be deemed to have been withdrawn and if the amount mentioned in the said sub-rule is paid, the facility of export without payment of integrated tax shall be restored.

2. The provisions of this notification shall mutatis mutandis apply in respect of zero-rated supply of goods or services or both made by a registered person (including a Special Economic Zone developer or Special Economic Zone unit) to a Special Economic Zone developer or Special Economic Zone unit without payment of integrated tax.

AI Summary

Supply to SEZ treated as export: IGST applies within same state, with LUT or tax-paid refund routes available. Supply to a Special Economic Zone unit or developer is treated as export and a zero-rated supply; such supplies are characterized as inter-state for IGST purposes even if within the same State. The supplier may either export under a bond or furnish a Letter of Undertaking to supply without payment of IGST and claim refund of unutilised input tax credit, or pay IGST on supply and claim refund of the tax paid. Rules prescribe eligibility, execution of LUT, and withdrawal or restoration of the facility when tax is not paid within the stipulated period.