What is meant by SEZ under GST?
A special Economic Zone (SEZ) is a specifically delineated duty-free enclave and shall be deemed to be foreign territory for trade operations, duties, and tariffs.
In simple words, a SEZ is like a special area where businesses can operate without paying GST. It’s treated as if it’s a part of another country when it comes to GST.
What are the salient features of the SEZ Scheme?
The salient features of the SEZ scheme are: -
∙ They allow duty-free import of goods and services for units and developers for their operations leading to a substantial saving in costs.
∙ All supplies by DTA to SEZ are treated as exports and are zero-rated in terms of application of GST. DTA means Domestic Tariff Area.
∙ SEZs are deemed to be airports, ports, Land customs stations, and Inland Container Depot under the Customs Act and the formation of a dedicated customs is there to ensure clearance for exports, imports, deemed exports, intra-SEZ sales, domestic procurement, and domestic sales
∙ SEZs ensure ease of doing business by ensuring online applications and reducing procedural complexities, bureaucratic hassles, and other trade barriers.
∙ All Goods and services supplied by SEZ units to DTA are treated as imports into India and is subject to all procedures and rules applicable in case of normal imports into India
∙ Economic laws are generally more liberal than the rest of the country’s general economic laws.
∙ No routine examination by customs authorities of export/import cargo
Is GST applicable on a supply made to SEZ units?
No. GST is not to be paid if you supply goods or services to a SEZ unit. It is considered a zero-rated supply.
What are the benefits available to the suppliers supplying goods or services to SEZ units?
Supply to SEZ will be considered as exports. Therefore, such supply can be made without payment of GST under LUT, and ITC relating to the same can be claimed as a refund. If the supplier does not opt for LUT, he can pay IGST on such supplies and can claim a refund.
Is GST applicable if the SEZ unit supplies goods or services to persons located in a non-SEZ area?
If an SEZ unit supplies goods or services to persons located in a Domestic Tariff Area i.e. non- SEZ area, it is considered an export, and no GST is levied on such transactions.
Is GST applicable if the SEZ unit supplies goods or services to another SEZ unit?
If a SEZ unit supplies goods or services to another SEZ unit, it is considered an inter-state supply and IGST is to be levied in such cases.
When goods are being imported from SEZ who will pay IGST?
Such supply is treated as import and the present procedure of payment of duty continues with the variation that IGST is levied in place of CVD.
Is there any separate procedure for GST registration of SEZ units?
While applying for GST, a person needs to select SEZ Unit under Reason to obtain registration in the Business Details section of PART B of the New Registration Application.
Also, Designation of Approving Authority, Approval Order Number, Approval date of Order, and Period of Validity should be entered.
What are the e-way bill procedures to be followed for SEZ supplies?
Under GST, transporters should carry an e-way bill when moving goods from one place to another if the value of these goods is more than Rs.50,000.
SEZ supplies are treated how the other inter-state supplies are treated. The SEZ units or developers will have to follow the same EWB procedures as the others in the same industry.
In case of supplies from SEZ to a DTA or any other place, the registered person who facilitates the movement of goods shall be responsible for the generation of e-way bills.
Where to disclose supplies made to SEZ units in GSTR 1 and GSTR 3B of the supplier?
As the SEZ unit or SEZ developer is registered and has GSTIN, the invoice details of supplies to them need to be reported in the section of supplies to registered taxpayers (B2B invoice details) with the appropriate SEZ flag.
In GSTR 3B, supplies to SEZ units are to be shown in Outward taxable supplies- zero-rated.
Conclusion
Special Economic Zones (SEZs) under GST offer businesses unique advantages, from duty-free imports to simplified procedures. GST does not apply on supplies to SEZ units, promoting ease of doing business.
Understanding the specific rules regarding SEZ transactions, including GST implications and e-way bill procedures, ensures seamless operations within these designated areas.
Leveraging these benefits, businesses can thrive in the conducive environment that SEZs provide, contributing to economic growth and efficiency.
