Sale from a SEZ unit to EOU

[Prerna Birla]

Hi,

A SEZ units imports goods from China and pays no GST due to exemption of GST on such transaction. Then such SEZ unit (a registered warehouse) sells such goods to EOU unit.

- Whether SEZ unit is liable to pay GST for such transaction ?

- Whether LUT filing is important for such case?

[SOWMYA CA]

- The SEZ is not liable to pay GST for such transaction if such goods are covered under LUT of the EOU and is required for the authorised operations of the unit. LUT under GST is required for the purpose of supply of goods without GST

[KASTURI SETHI]

SEZs are treated as being outside India for the purpose of duties of Customs.

As per Section 2 (m) of SEZ Act, supply from SEZ to EOU is export and hence such supply is 'import' by EOU. It is pertinent to mention that EOU is like any other supplier under GST and all the provisions of the GST laws apply. The benefit of exemption from Basic Customs duty on imports is available to EOU.

LUT is must.

[Prerna Birla]

Thank you for our reply.

Also, if LUT is filed 4-5 days after the transaction date. Whether the SEZ unit be liable to pay GST and then claim refund in such case?

[KASTURI SETHI]

Need not pay GST and claim refund. Delay is condonable. See para no. 44 of Circular no.125/44/2019-GST dated 18.11.19 as amended.

[Raghunandhaanan rvi]

Sir

SEZ / FTWZ unit may transfer imported goods to an EOU subject to follow the below procedure

EOU or SEZ ( on behalf of EOU) file a home consumption bill of entry at SEZ

The bill of entry is filed with documents ( Invoice, Procurement Certificate, Bonded warehouse license, Letter of Approval, etc)

EOU is eligible to claim duty-free clearance of goods purchased from SEZ/FTWZ vide Customs Notification No. 52/2003.

A re-warehousing certificate issued by jurisdictional customs of EOU is to be submitted to SEZ customs within 45 days from the date of clearance of goods, failing which jurisdictional customs will initiate action to recover customs duty with interest from EOU.

For more details please refer to Rule 46(12) of SEZ rules 2006 amended from time to time

[KASTURI SETHI]

Dear Sir,

Notification No. 52/2003-Cus. (N.T.), dated 22-7-2003 stands rescinded/superseded vide 13/2007-Cus. (N.T.) dated 21-02-2007

[Raghunandhaanan rvi]

Sir,

The Customs Notification No. 52/2003 Customs which I refer to is "Tariff" Notification and not Non-Tariff Notification.

[KASTURI SETHI]

Dear Sir,

You are right.

[Gaurav Gupta]

Hi

As per above comment, it is stated that as per Section 2(m) of SEZ Act, supply from SEZ to EOU unit is export. This is not borne out from the law above quoted. Can you pls clarify. I may be missing out on something..

[Raghunandhaanan rvi]

Mr. Gaurav Gupta

There is a difference between SEZ and EOU though both were initiated to boost exports

An EOU can be set up anywhere in the country (DTA), whereas SEZ is a special facility and demarcated enclave and deemed to be outside the customs jurisdiction and therefore, a foreign territory.

Thus, Sales made from SEZ to DTA are considered imports for DTA, and applicable customs duties on such goods are payable.

Since EOU imports goods from SEZ, they entitle to claim duty exemption under Customs Notification No. 52/2003.

AI Summary

Supply from SEZ to EOU treated as export; GST exemption applies if LUT and customs procedures are complied with.
Supply from a SEZ unit to an EOU is treated as an export by the SEZ and import by the EOU; where goods are for the EOU's authorised operations and covered by a Letter of Undertaking, the SEZ unit need not pay GST and LUT filing enables supply without GST. Procedural compliance requires filing a home-consumption bill of entry with supporting documents and submitting a re-warehousing certificate within the prescribed period to secure duty-free clearance; noncompliance may prompt recovery of customs duties with interest.