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Section 16 of the IGST Act 2017 on Zero rated supply
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....ection 16 of the IGST Act 2017 on Zero rated supply<br>By: - K Balasubramanian<br>Goods and Services Tax - GST<br>Dated:- 26-12-2025<br>The field formation working in CBIC and looking after GST have only one objective which is to raise the demand amount in the SCN issued to the extent that is maximum possible. Unfortunately, there is no upper limit for permissible amount up to which a SCN m....
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....ay be issued. This being so, the audit teams across India have started raising huge demands running in to several thousands of crores based on zero rated supplies made by DTA units to SEZ on the pretext that no endorsement certificate for authorized operations as approved by SEZ officer were furnished during audit. Under these circumstances, it becomes highly imperative to create awareness ....
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....amongst tax professionals dealing such matters that this procedural requirement to obtain endorsement is happening in almost all cases through the system itself and the supplier has no control on such endorsements as this is the responsibility of the buyer SEZ unit to take care. Hence, the eligibility of Zero rated supply as provided in section 16 of the IGST Act 2017 as it stood from time ....
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....to time are analysed for the benefit of all concerned with this issue. 01/07/2017 to 30/09/2023: This section was introduced on 01/07/2017 and has seen the first amendment only on 01/10/2023. Accordingly, the law as it stood up to 30/09/2023 may be grouped in to three different baskets. Basket 1 : All cases where the supplies are made by paying applicable IGST and seeking refund....
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..... For the period up to 30/09/2023 are unconditional on the use of the materials as to whether the same are for authorized operations or not. Basket 2: Supplies to SEZ may be made by DTA without payment of IGST as it amounts to zero rated supply and seek refund of ITC involved in such supplies. This requires furnishing of bonds or letter of undertaking. The supplier gets refund of ITC o....
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....n the supplies to SEZ.. Basket 3: Those who make only part of their turnover to SEZ units and major portion is fully taxable may use the ITC as such without seeking any refund. The law requires the supplies to be for authorized operations of SEZ only with effect from 01//10/2023 as the words for authorized operations were inserted in section 16 only on 01/10/2023. Above all, the requirement....
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.... for seeking endorsement arises only when the supplier seeks refund of either full IGST or only the ITC involved in supplies. 01/10/2023 to 31/10/2024 : As the new condition for authorized operations was introduced with effect from 01/10/2023, the requirement to seek endorsement from SEZ officer to the effect that the supplies are for approved operations of the SEZ has to be fulfilled. Moreover,....
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.... the conditions have become little more stringent only with effect from 01/10/2023 as the clause 3 was substituted with 01/10/2023 which refers to section 54 of CGST Act on refund as well as imposes condition on realization of sale proceeds within stipulated time. From 01/11/2024: A new condition by way of insertion of clause 5 to section 16 was imposed to provide that refund is not allowed when ....
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....such supplies to SEZ are subjected to export duty. Based on the above analysis, it may be concluded that there was no requirement up to 30/09/2023 to seek endorsement from SEZ officer for all cases and this requirement on endorsement is to be fulfilled from 01/10/2023 in all cases where either full tax or ITC is claimed as refund as the case may be. Accordingly, for cases where no refund is sough....
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....t and the ITC pertaining to ZERO RATED SUPPLY is used in the normal course of business, there in no need for endorsement even as on date. Readers may refer to section 16 of the IGST Act as on date giving effect to the major amendments that took place on 01/10/2023 as well as on 01/11/2024. The above views are personal based on the reading of the legal provisions as contained in Section 16 of the....
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.... IGST Act. The affected persons on this aspect may refer to the recent judicial pronouncements of the jurisdictional high courts on this issue. Part 2 of this article shall be published as the next article during this week.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....