ISD to SEZ units

[LAKSHMINARAYANAN TR]

Hi,

Can Input services Distributor distributes credit to one of their units in SEZ? if so, how to distribute when both of them in same state? IGST or not?

Thanks in Advance.

Durai

[Rajagopalan Ranganathan]

Sir,

According to Section 16 of IGST Act, 2017

Therefore when you supply goods or service or both to SEZ Unit or SEZ Developer you can do so as per above provisions. Therefore in my opinion you cannot distribute credit to SEZ unit or Developer.

[KASTURI SETHI]

Also read these FAQs

Q14. How to distribute common credit among all the recipients of an ISD?

Ans. The common credit used by all the recipients can be distributed by ISD on pro rata basis i.e. based on the turnover of each recipient to the aggregate turnover of all the recipients to which credit is distributed.

Q15. The ISD may distribute the CGST and IGST credit to recipient outside the State as _______

(a) IGST

(b) CGST

(c) SGST

Ans. (a) IGST.

Q16. The ISD may distribute the CGST credit within the State as _____

(a) IGST

(b) CGST

(c) SGST

(d) Any of the above.

Ans. (b) CGST.

[LAKSHMINARAYANAN TR]

Dear Sir

Thank you for your feedback. While I understand the form of distribution within and outside state by ISD. Can SEZ avail ITC remains unclear, in reality, certainly suppliers insist SEZ units to pay the GST as they initially Had a struggle with LUT, now with refunds. We also observe that unregistered Suppliers do supply to SEZ units without GST, though technically law doesn't allow them without registration. These are the practical issues we have for SEZ units. How about supplies u/s 9(3), if the SEZ unit being the recepient, are they suppose to pay the tax, if so, can they take ITC and go for refund? Please share your thoughts.

[KASTURI SETHI]

In my view, ISD can distribute IGST to SEZ . Regarding the remaining second query, SEZ as receiver will pay GST and get refund.

[LAKSHMINARAYANAN TR]

Many thanks again for shedding some light

AI Summary

ISD distribution to SEZ: whether input tax credit can be allocated and how tax characterisation affects refund rights. Whether an Input Service Distributor may distribute credit to a Special Economic Zone unit: one practitioner cites Section 16 of the IGST Act and concludes credit cannot be distributed to an SEZ unit or developer; FAQ guidance states common credit is distributed pro rata, distributions to recipients outside the State are IGST, and distributions within the State are CGST; practical issues include supplier GST collection practices, LUT/refund mechanisms, and unregistered suppliers; another practitioner considers ISD distribution of IGST to SEZ permissible and that SEZ recipients paying GST can obtain refunds.