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Conditions on Supply of Goods & Services to SEZ

GST Effect on SEZ

Now that GST has come in full force, there are so many facets that still need to be understood in order to save ourselves from incorrect payment system or ignorant rendering of services.

Therefore, this article deals with one core aspect of Goods and Service Tax – SEZ & IGST Payments.
There are 2 different cases when goods are supplied with or without IGST payment. Take the guide:

Case I

When Goods & Services Are Supplied to SEZ By DTA Without IGST Payment
a) Furnish bond or Letter of Undertaking by the supplier for making zero rated supplies.

b) Letter of Undertaking has to be furnished by suppliers holding a status holder certificate or by he who receives 10% of their export payments in convertible foreign exchange (subject to in excess of INR 1 crore for the previous financial year).

c) A bank guarantee involving maximum 15% of the tax needs to be furnished to execute the bond.

d) Goods should be exported within 3 months from the date of issue of invoice.

Note: in case the services are in consideration, payment in convertible foreign exchange should be received within one year from the date of invoice (Rule 96A)

Case II

When Goods & Services Are Supplied To SEZ By DTA With IGST Payment

a) Supplier should make supplies after IGST payment and utilization of Input Tax Credit

b) According to GST provisions, SEZ cannot utilize the input tax credit or get refund of IGST payment claimed by the supplier.

c) Supplier, however, can claim the IGST payment once SEZ claims that it has not availed the Input Tax Credit.

d) Also, supplier needs to confirm and declare in written that the tax incidence of refund of IGST has not been passed to the SEZ unit.

e) Therefore, the law clearly states that the IGST amount should not be recovered by the supplier of Domestic Tariff Area by the SEZ account nor should any kind of payment be made by the SEZ account.

f) In case the supplier wishes to pass the tax incidence to SEZ unit, SEZ can avail ITC of the same against exports by furnishing a bond or a Letter of Undertaking in the format prescribed in Form RFD 11.

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