Public Bonded Warehouse (PBW) Under Section 57 of Custom Act to SEZ (Special Economic zone) transaction

[Danish Azfar]

Hi Experts,

We have one customer in the SEZ (Special Economic Zone) who is releasing the order to us in small Quantities. The order goods we need to procure from Outside India.

We want to import the Goods and store them in a Public Bonded warehouse (under Section 57 of the Customs Act in bulk (since we are storing the Goods in a Public Bonded warehouse, then no need to pay the duty and taxes).

Once our SEZ customer places the PO with us for a small Quantity, we will then sell it from the Public Bonded warehouse to the SEZ. Since SEZ is a special zone, there will be no duty and IGST on the transaction of PBW to SEZ.

Please provide feedback, is this transaction duty and IGST free and what is the procedure involved in terms of documentation.

Thanks

[YAGAY andSUN]

Your proposed transaction structure—importing goods in bulk into a Public Bonded Warehouse (PBW) under Section 57 of the Customs Act, 1962, and supplying them in smaller lots to a SEZ unit—is legally valid and can be executed without payment of customs duty or IGST, subject to compliance with applicable procedures.

Tax Treatment:

Import into PBW:

Under Section 57 and 58, goods imported into a PBW are not assessed for duty or IGST at the time of import. They remain under customs control, and no duty is payable until clearance for home consumption or export.

Supply from PBW to SEZ:

As per Section 69 of the Customs Act and Section 16(1)(b) of the IGST Act, supply from PBW to an SEZ is treated as a zero-rated supply, provided the goods are used for authorized operations of the SEZ.

Therefore, no customs duty or IGST is payable when goods are cleared from PBW directly to the SEZ unit.

Required Procedure:

At Import (Into-Bond Entry):

File a Bill of Entry for Warehousing.

Execute a warehouse bond under Section 59.

Maintain records as per Warehousing Regulations, 2016.

At Clearance to SEZ (Ex-Bond Entry):

File an ex-bond Bill of Entry for export under Section 69.

Obtain endorsement from SEZ Customs for receipt of goods.

Use SEZ Bill of Export or similar documents for customs clearance.

GST Compliance:

Supply to SEZ can be made without payment of IGST under Letter of Undertaking (LUT).

Issue a tax invoice mentioning supply to SEZ under LUT.

Report the transaction in GSTR-1 (Table 6A) and GSTR-3B (Table 3.1(b)).

Conclusion:

Your model is tax-efficient and valid under law. No customs duty or IGST is payable at any stage if all procedural compliances are followed, including correct warehousing, ex-bond filing, SEZ endorsement, and GST reporting.

Alternate Solution:

You may also follow/check the Advance Authorization Route from DGFT in such transactions.

***

[Danish Azfar]

Thanks@Yagay andsun for the opinion. 

Can we also have opinions from other experts as well....

AI Summary

Business can import goods to Public Bonded Warehouse under Section 57 then supply duty-free to SEZ customer A business seeks to import goods in bulk and store them in a Public Bonded Warehouse under Section 57 of the Customs Act, then supply smaller quantities to a Special Economic Zone customer. An expert confirms this transaction structure is legally valid and duty-free. Import into the warehouse requires no duty payment until clearance, while supply to the SEZ qualifies as zero-rated under Section 69 and IGST provisions. Required procedures include filing appropriate bills of entry, executing warehouse bonds, obtaining SEZ endorsements, and maintaining GST compliance through proper invoicing and reporting. The arrangement avoids customs duty and IGST at all stages with proper documentation.