Masters India

SEZ And GST/EWB Provisions

Prakash Matre
Prakash Matre at June 20, 2023

A Special Economic Zone (SEZ) is a geographical region that has different taxation and legal regulations than other regions within the same country. This privilege is provided to SEZs to increase foreign investments. Hence, even though they are located within the country's boundaries, they are treated as foreign territories for tax purposes. That means any supply to or from an SEZ developer or SEZ E-way bill unit is treated as an inter-state supply. Under GST, Integrated Goods and Service Tax (IGST) applies to all inter-state supplies. In this article, we will understand -

GST Provisions For SEZ

It is settled that SEZs’ are to be treated as a foreign territory in India and supply to SEZ without payment of tax any supply to or from SEZs’ will be considered under the rules of import/export, attracting tax at ‘zero’ rate under GST.

Export/Import - Meaning

  • Supplying goods or services from a Special Economic Zone to a location outside India via any mode of transport is export.
  • Supplying goods or services from one unit/developer in SEZ GST rate to another unit/developer in the same SEZ or another SEZ is export.
  • Receiving the supply of goods or services from a location outside India to an SEZ via any mode of transport is an import.
  • Receiving the supply of goods or services to a unit/developer in an SEZ from another unit/developer in the same SEZ or another SEZ is considered an import.

Taxation of SEZ Under GST

  • Any supply to the SEZ unit is exempted.
  • Any supply from SEZ Unit to Domestic Tariff Area (DTA) is treated as Imports (for the DTA) and is taxable under a Reverse Charge basis.
  • Suppliers supplying* goods or services or both to SEZs can avail -
    • Bond or LUT to claim credit of ITC without paying IGST.
    • Pay IGST and claim a refund of taxes paid.

*Since How to generate E Way Bill for SEZ supply are considered as inter-state supplies it can be said that when an SEZ supplies goods or services or both to anyone, it will be deemed to be a regular inter-state supply and will attract IGST.

E-Way Bill Provisions For SEZ Supply

Under GST, an E-Way Bill (EWB) is mandatory to be carried by transporters who move goods from one place to another if the value of goods is more than INR 50,000. How to make E Way Bill for SEZ supply is the same as it is for others. That means, If goods are supplied from SEZ to a DTA (Domestic Tariff Area) or any other place, the GSTIN holder whose goods are being supplied/transported should generate the e-way bill to facilitate the interstate movement of goods.

For example, A Bangalore-based businessman Mr Rohit has to receive goods worth INR 1,00,000 from an SEZ (is E-way bill required for sez supply) unit, R R Enterprise located in Mangalore, Karnataka. Here, goods have to move out from R R Enterprise and have to be delivered in Bangalore. As understood earlier, any movement of goods outside the Eway bill for sez supply is considered as an inter-state supply. So, even though the goods, in this case, are moving within Karnataka, it will be considered an inter-state movement, and IGST will be applicable. Here, E-Way Bill is required to support the inter-state movements of goods as the value of this supply is more than INR 50,000. Ideally, R R Enterprise has to generate the E-way bill. However, the transporter can generate the EWB too.

Note: If R R Enterprise is not registered under GST and if Mr Rohit has a valid GSTIN (registered dealer) then, Mr Rohit has to generate the E-way bill.

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