SEZ / EOU - refund of unutilised itc

[Ramakrishna Malapaka]

Respectable friends,

please clarify the below queries..

A). Whether Unutilised CgSt /Sgst Credit balance earned on capital goods of a take over company can claim refund after its conversion in to SEZ or EOU?

B). For any reason if it is not possible, can SEZ or EOU unit pay IGST on export of goods and claim refund? Under sec 54 / Rule 96(10) ?

Are there any restrictions to the same ?

Regards

Ramakrishna

[Shilpi Jain]

Claiming refund of GST paid on capital goods by exporting without payment of IGST is not allowed under the law presently.

SEZ can export with payment of taxes.

EOU can export with payment of taxes provided that the exported goods are not manufactured with any duty free imported material.

[Raam Srinivasan Swaminathan Kalpathi]

A) As per second proviso to Section 25(1) any SEZ unit must take a separate registration as distinct from the place of business located outside SEZ. Further any supplies to and from SEZ will only suffer IGST (not CGST/SGST). Therefore the question of transfer of CGST and SGST to an SEZ unit can never arise.

B) This query needs further elaboration. Please note that you can ask your DTA suppliers to issue zero-rated invoice to SEZ unit as provided in Section 16(1)(b) of IGST Act by uploading LUT in their GST portal account in Form GST-RFD-11. FYKI, Customs do not levy IGST for imports slated for supply to SEZ units. The only caveat is - the supplies have to be for authorised operations. SEZ authorities have issued in 2018 a list of authorised services - you may go through the same. Thus I do not foresee a situation wherein you will need to pay IGST on your export/ SEZ supplies and then claim refund as the paramount objective I presume of this query is to set off the ITC with the IGST payable on exports. Is it not?

Further please note as supplies to DTA from SEZ will be processed through Customs there is no way you will be able to set off the ITC with the GST payable on DTA sales.

Further-more, as all exports from SEZ go through SEZ online portal and not ICEGATE portal I contemplate (EXPERTS - please correct) the facility of exporting from SEZ with payment of IGST is at present not available.

Also, hectic parleys were underway, a few months back, to link SEZ online with ICEGATE portal (rechristened as ICEGATE-2). As on date the same is yet to fructify.

[Shilpi Jain]

There is no restriction under the law for SEZ's to export with payment of tax. Any portal not allowing to do this should be challenged.

AI Summary

Zero-rated supplies to SEZ/EOU require IGST treatment; CGST/SGST credit balances cannot be transferred to SEZ registration. Unutilised CGST/SGST credits on capital goods cannot be transferred to an SEZ/EOU because SEZ units require separate registration and supplies involving SEZs attract IGST, not CGST/SGST. Exports to SEZ/EOU are zero-rated under the IGST framework, allowing domestic suppliers to issue zero-rated invoices by furnishing a Letter of Undertaking; hence exporting without IGST to preserve or obtain refund of CGST/SGST credits is not consistent with the statutory scheme. Administrative portal differences and authorised-operations requirements may affect practical implementation.