Supply to SEZ

[Ethirajan Parthasarathy]

As per section 16 of IGST Act, supplies made to SEZ units & SEZ developers are treated as “zero rated supply”. But in the recent decision of AAR West Bengal in the case of Garuda Power Private Limited has ruled that :

The Applicant shall be liable to pay tax when supplying to Units and Developers of Special Economic Zones subject to the provisions of section 16 of the Integrated Goods and Services Act, 2017.

I request to learned friends to throw light on the meaning of ruling by AAR

[Rajagopalan Ranganathan]

Sir,

Section 16 of IGST Act, 2017 stipulates that- "(1) “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 and claim 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 Act or the rules made thereunder.

The sanction of refund will be governed by provisions of Section 54 of CGST Act, 2017 and rule 96 and 96A of CGST Rules, 2017.

[YAGAY andSUN]

You may claim refund on such paid IGST.

[ANITA BHADRA]

In re Garuda Power Private Limited (GST AAR West Bengal) = 2018 (8) TMI 212 - AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL

The Applicant who is a supplier to SEZ units and developers shall be liable to pay tax when supplying to Units and Developers of Special Economic Zones subject to the provisions of Section 16 of the Integrated Goods and Services Act, 2017.

Although the questions raised in the Application touch upon certain provisions of the IGST Act and supplies to SEZ units or SEZ developers are inter-state supplies under section 5 (b) of the IGST Act,

The Applicant, as appears in course of Personal Hearing, ultimately wants to know whether he is liable to pay tax on his supplies.

The question raised in the Application is found to be neither decided by nor pending for decision before any authority under any provisions of the GST Act.

The officer concerned raises no objection to admission of the Application.

Since the Applicant supplies to units and developers of Special Economic Zones only, as stated in the Application and reiterated by the authorised representative during Personal Hearing, the provisions of Section 16 of IGST Act will be applicable in this case and the tax liability will be at zero rate under sub section 1(b) of the IGST Act.

He may supply without paying tax subject to the provisions under section 16 (3) (a), or he may supply on payment of tax and claim refund subsequently under section 16 (3) (b) of the IGST Act.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views ofMs. Anita

AI Summary

Suppliers to SEZs Can Choose Zero-Rated Supplies or Pay GST and Claim Refund, Says AAR per IGST Act Sec 16 A query was raised regarding the tax implications of supplying goods to Special Economic Zone (SEZ) units and developers under the Goods and Services Tax (GST) framework. According to Section 16 of the Integrated Goods and Services Tax (IGST) Act, such supplies are considered 'zero-rated.' However, a ruling by the Authority for Advance Rulings (AAR) in West Bengal indicated that the supplier must pay tax when supplying to SEZs, but can claim a refund. The discussion clarified that suppliers can either supply without paying tax under a bond or pay tax and claim a refund later, as per the provisions of the IGST Act.