Supply of goods from EOU to SEZ

[Dashrath Walkoli]

Sir,

We are a EOU unit and few supplies of goods are made to SEZ. Whether reversal of duties of Custom leviable under First Schedule to the Customs Tariff Act, 1975 availed as exemption on the inputs utilized for the purpose of manufacturing of such goods, is required to be done ?.

[YAGAY and SUN]

In your case, since you're an EOU (Export Oriented Unit) making supplies to an SEZ (Special Economic Zone), and you're availing exemptions of customs duties on inputs under the First Schedule to the Customs Tariff Act, 1975, the key issue is whether you need to reverse those exemptions when such goods are supplied to SEZs.

✅ Clarification under Indian Tax Laws:

As per prevailing Customs and GST regulations, here’s how it works:

🔹 Supplies from EOU to SEZ — Deemed Exports

• Supplies made by EOU to SEZ units are considered “exports” under both Customs Act and GST Law.
• SEZ is treated as being outside the customs territory of India for the purpose of authorized operations. So, no reversal of duties is required as long as the supply is for authorized operations of the SEZ.

🔹 Exemption Availed on Inputs – Is Reversal Required?

• No, reversal of customs duties availed as exemption under the First Schedule to the Customs Tariff Act is not required if:
  • The finished goods are supplied to SEZ for authorized operations.
  • The supplies are made under a proper Bill of Export or through ARE-1 procedures.
  • The SEZ unit provides necessary endorsement confirming receipt of goods for authorized operations.

🔸 Supporting Legal References:

1. Section 26(1) of SEZ Act, 2005: Exempts SEZ from duties on goods used for authorized operations.
2. FTP (Foreign Trade Policy) and CBIC Circulars (e.g., Circular No. 29/2006-Cus): Clarify that supplies from EOU to SEZ are treated as exports.
3. Rule 6 of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017: Also supports that no duty reversal is needed if the final product is exported or deemed exported.

🔹 When Reversal Would Be Required:

• If the supply to SEZ is not for authorized operations.
• If proper export documentation is not maintained.
• If goods are diverted to DTA (Domestic Tariff Area) instead of SEZ.

✅ Conclusion:

If you're supplying from EOU to SEZ with proper export documentation, and the goods are used for authorized operations, reversal of custom duty exemption is NOT required.

[Shilpi Jain]

Customs duty reversal not required as the goods are not cleared to any DTA unit. Clearance to SEZ will not entail reversals.

[Shilpi Jain]

The relevant notification in this regard is 52/2003-Cus.

[KASTURI SETHI]

Supply to SEZ is zero rated. It is export. Hence reversal not required.

[KASTURI SETHI]

ST - Service tax is not payable on inter-unit services rendered by Tata Growth Shop to Tata Steel's Steel Works, as both units belong to same legal entity and there is no separate service recipient: CESTAT

2024 (8) TMI 598 - CESTAT KOLKATA

2014 (5) TMI 464 - CESTAT KOLKATA

Explore the possibility, if any from the above case law.

AI Summary

Deemed exports to SEZ: customs duty exemptions on inputs need not be reversed where transfers are for authorized operations.
Supplies from an EOU to an SEZ are treated as deemed exports and, where transfers are for authorized SEZ operations with proper export documentation and receipt endorsement, exemptions under the First Schedule to the Customs Tariff Act availed on inputs need not be reversed; reversal is required only if supplies are not for authorized operations, documentation is lacking, or goods are diverted to the domestic tariff area.