Services supplied to SEZ

[Kaustubh Karandikar]

XYZ supplying services to SEZ for transportation of goods by Sea for Export. In relation to this, XYZ procures services from Shipping Line and shipping line charging Ocean Freight (without GST) and other charges (with GST). XYZ in turn recovering these charges from SEZ and charging Ocean Freight with mark - up (without GST) and other charges (with GST). Can XYZ claim exemption from GST for other charges also being services supplied to SEZ? If yes is XYZ required to procure LUT? In my view, XYZ can claim the exemption being supplied to SEZ subject to getting LUT. Views of the experts please.

[Shilpi Jain]

This will be a zero rated supply and not exempt.

THis can be supplied without payment of GST by obtaining an LUT.

[KASTURI SETHI]

Dear Sir,

I could not understand your following sentence.

"In my view, XYZ can claim the exemption being supplied to SEZ subject to getting LUT ?."

Does exempted services require LUT ?

[Kaustubh Karandikar]

Sir, as mentioned by Shilpi ji, it will be treated as export and therefore Zero rated. Accordingly, in my view, LUT will be required.

[KASTURI SETHI]

Dear Sir,

What I intend to communicate that 'exempted goods/services' and 'LUT' both cannot go simultaneously.

[Shilpi Jain]

It is generally loosely used in the industry. Zero-rated, exempted.

[KASTURI SETHI]

There is a great gulf between the words, 'zero rated' and 'exempt'.

[Ganeshan Kalyani]

Supply to SEZ is treated as export so by obtaining LUT you can raise invoice without GST. And also you can claim refund of corresponding input tax.

[Shilpi Jain]

For the purposes of gst, supply to SEZ is not export but only zero rated

[Shilpi Jain]

Also the law is getting amended only to treat authorized operation related supplies as zero rated. So if any service or goods are supplied which are not used for authorized operations, will not be 0 rated.

AI Summary

Zero-rated supply to SEZs allows invoices without GST under LUT, with input tax refund subject to authorized operation use.
Supply of services to a Special Economic Zone for export by sea is zero-rated, permitting supply without payment of GST if the supplier furnishes a Letter of Undertaking (LUT). Zero-rating (distinct from exemption) allows the supplier to claim refund or utilize corresponding input tax credits. Amendments limit zero-rating to supplies used for authorized SEZ operations; supplies not used for authorized operations will not qualify as zero-rated.