GST

Special Economic Zone (SEZ) – GST and EWB Applications in Brief

Special Economic Zone (SEZ) – GST and EWB Applications in Brief

The Indian government started a policy in a few regions with a few unique regulations for import and export companies. There will be no customs duty, excise duty, income tax, or minimal alternative tax in accordance with that policy (SEZ Policy). No dividend distribution tax will be applied to imports or exports made in these regions. All import and export laws from other countries will now be implemented if you buy goods from these SEZ zones. However, we only bought them from that one nation. They will, therefore, be classified as an unknown region for fee reasons even though they are located inside the country’s borders (or the same state).

Understanding Special Economic Zone (SEZ)

A special economic zone (SEZ) is a designated area where enterprises may comply with the law more easily and pay simpler taxes. SEZs are found inside a nation’s boundaries. For taxation reasons, they are yet regarded as a foreign country.

This is why goods coming from and going to special economic zones are handled in a different manner than the normal supplies. To understand it, SEZs are seen as being situated in a foreign territory even though they are situated within the same nation.

SEZs aren’t considered to be a part of India. It is clear that any supply made to or by a developer of a special economic zone or a special economic zone unit is subject to the GST and is thus regarded to be an interstate supply for which the Integrated Goods and Service Tax (IGST) would be charged.

What are Exports and Imports?

The exchanges can be classified as exports and imports since the Special Economic Zones are regarded as foreign territories:

Export

Regardless of the means of conveyance, exports are the Supply of commodities from a special economic zone outside of India. Additionally, it describes the transfer of commodities from one developer or unit to another developer or unit in the same special economic zone or another special economic zone.

Imports

Regardless of the method of transportation, imports are the Supply of products made available to a special economic zone from a foreign country. Additionally, receiving commodities from one developer or unit inside a special economic zone to another developer or unit within the same special economic zone or to another special economic zone is referred to as such.

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GST Treatment Special Economic Zones (SEZ)

Because SEZs are regarded as different areas, the Supply to and from them is referred to as import and export.

  • Transporting products or services from a location in India that is not a SEZ to a location that is a SEZ is regarded as exporting such goods or services.
  • An SEZ provider is also deemed to be exported if they choose to provide products or services to another SEZ supplier.
  • An import occurs when products or services, or both, are delivered to a SEZ from a place outside the SEZ.
  • It is deemed an import when one SEZ gets products, services, or both from another SEZ.
  • When a supply is made to or from a SEZ, it is regarded as an interstate supply.

Let’s imagine that Delhi is home to one SEZ unit. Inter-state supplies are those provided by this SEZ unit to a vendor based in Gujarat. Similar to this, deliveries from the Gujarati vendor to the Delhi SEZ unit are regarded as inter-state supplies. In certain circumstances, Integrated Goods and Service Tax (IGST) will be used in accordance with GST regulations.

Features of GST on SEZ

  • Since certain products and services come under the export category, transporting commodities or services to the SEZ will be regarded as a zero-rated supply. GST is not required to be paid along the whole value chain for zero-rated supplies.
  • A delivery from a SEZ to a third party is regarded as an interstate supply, and the IGST is due at the standard GST rates.
  • Under the terms of a bond or letter of undertaking, a supplier may transfer products, services, or both to the SEZ. As a result, there is no longer any IGST due, and the supplier is now qualified to submit an input tax credit (ITC) claim.
  • A supplier has the option to move products and services to a SEZ while paying the IGST and then requesting a tax refund.
  • The reverse charge is applied when a SEZ provides products, services, or both to the domestic tariff area (DTA). The recipient of the Supply in the DTA1 must pay taxes like import charges and customs duties. This is because a transaction of this nature is regarded as an export to the DTA.

GST Laws on SEZ

While debating fees, being subject to SEZ restrictions might be relatively advantageous. Under GST, any stock of labour or goods is considered a zero-appraised supply to an SEZ. That suggests that these provisions are subject to a GST charge rate of zero. Supplies made to SEZs are exempt from GST and are treated as goods. As a result, the companies selling goods to SEZs can:

  • LUT or Supply under bond with no IGST instalment and the ability to ensure ITC credit or
  • Supply on an IGST instalment and can ensure the duty-paid discount.
  • Every time a SEZ provides goods to its administrations, it is treated as a regular supply between states, and in this case, IGST is applied to such Supply.

The exception to this rule is when a SEZ provides goods, services, or both to a DTA (Domestic Tariff Area). At that point, the provision is considered to be a product of the DTA, and the person receiving it will be solely responsible for paying all import taxes and customs duties.

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Applicability of E-Way Bill Rules for SEZ

In terms of the e-way bill’s applicability to SEZ residents, the GST taxation system mandates that transporters carry an e-way bill whenever they move goods from one location to another, provided that the consignment in question has a value greater than 50,000. This is because supplies coming from a SEZ are treated the same as any other interstate supply. The SEZ units or developers will also be expected to follow the usual EWB processes, just like the other participants in the same industry. This is similar to the situation with conventional interstate Supply. The registered person who supports the transactional process is responsible for creating an e-Way Bill if a good, service, or both are delivered from an SEZ to a DTA or any other location.

Regarding the validity of e-Way Bills issued by the SEZs, its validity is fixed to one day as soon as the appropriate parties issue the e-Way bill. As long as the cargo’s journey does not exceed 100 km, the legality of the e-way bill in issue remains the same. After that, when the items travel an additional 20 or 30 km, depending on the kind of e-Way bill issued, a new day is added to the document’s validity term.

GST Refund for SEZ Exports and Supplies

supplies to special economic zones and Exports are “zero” rated in accordance with the IGST Act of 2017. The phrase “zero-rated supply” describes a good that is GST-free throughout its entire supply chain. While GST is levied on the input side in the event of an exempted supply, only the output is exempt.

A GST-registered individual may request a GST refund after making a zero-rated supply, according to the CGST Act, 2017. The two options are as follows:

  • The provision of goods or services under a bond or letter of undertaking without making any payment of integrated tax and the demand of a refund of unused SGST, CGST, UTGST, IGST, and ITC.
  • The payment of an integrated tax on goods or services and the request for a GST refund on the tax already paid.

Conditions for claiming GST Refund on Exports

To be eligible for a GST refund, the GST-registered taxable person must fulfil the requirements listed below:

  • An export report or manifest that includes the quantity and date of shipping bills or export bills is dutifully filed by the person in charge of the conveyance conveying the export goods.
  • The application for refund will be deemed complete, and the refund procedure will start after the shipping bill, Export General Manifest (EGM), and a suitable return have been submitted.
  • For service exporters, the refund application must be accompanied by a statement listing the number and date of invoices as well as the required  Foreign Inward Remittance Certificates or Bank Realisation Certificates.

Conclusion

A Special Economic Zone is a geographical area with differing taxation and regulatory requirements from other districts inside the same nation. The purpose of this office is to encourage untested suppositions in SEZs. Therefore, they will be viewed as a new area for charge purposes even when they are arranged as efficiently as feasible (or in the same condition). This implies that any delivery to or from a SEZ engineer or SEZ unit will be classified as a between-state supply and that all between-state deliveries are subject to the Integrated Goods and Service Tax (IGST) under the GST.

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Frequently asked questions

  1. Is GST applicable in Special Economic Zone?

    Any provision of products, services, or both to a developer or unit within a Special Economic Zone shall be regarded as zero-rated. Therefore, these goods and services are GST-free. In other words, supplies made to SEZ are deemed exports, and such supplies are not subject to GST.

  2. What is the GST rate in the Special Economic Zone?

    Any delivery of goods or services to a SEZ developer or unit is zero-rated, meaning the applicable GST tax is not applied. Supplies made in SEZ are considered exports and free from GST.

  3. Is SEZ required to pay GST under RCM?

    The SEZ Developer is a local authority, and as per Notification No. 10/2017-Integrated Tax (Rate), as amended from time to time (the “Reverse Charge Notification”), services of renting of immovable property provided by a local authority to any person registered under GST (including SEZ), are subject to GST under RCM.

  4. How do I file a GST return for SEZ?

    • You must submit a Form RFD-01 refund application to the GST Portal in order to request a refund for more than one tax period.
    • For the time period for which a reimbursement is requested, you must give the adjusted total turnover and the turnover of Zero-Rated Supply to SEZ units and developers.

  5. What is the meaning of a Special Economic Zone SEZ?

    A Special Economic Zone, often known as a SEZ, is a region or enclave inside the boundaries of a nation that has more lenient economic regulations than the whole nation.

  6. What is SEZ and benefits?

    Businesses located in SEZs are eligible for benefits such as water, free energy, a rebate on land costs, etc. In terms of trade operations, duties, and tariffs, these economic zones are categorized as duty-free industrial parks.

  7. What are the three types of SEZ?

    • Free Trade Zones
    • Export Processing Zones
    • Enterprise Zones

  8. What is a Special Economic Zone in GST?

    A special economic zone (SEZ) is a designated area where enterprises may comply with the law more easily and pay simpler taxes. SEZs are found inside a nation's boundaries. For taxation reasons, they are yet regarded as a foreign country.

  9. Is SEZ applicable for GST?

    GST allows for the zero-rated delivery of goods and services from a domestic tariff region to a Special Economic Zone developer or unit. This indicates that certain goods are exempt from taxation under the GST Law.

  10. How does SEZ affect GST?

    All products and services delivered to the Domestic Tariff Area (DTA) from a SEZ are regarded as imports. Therefore, the Basic Customs Duty (BCD) and Countervailing Duty (CVD) are applied in accordance with such Supply.

  11. What is the e-way bill for SEZ units?

    In order to expedite the interstate flow of goods, the GSTIN holder whose products are being provided or carried must create the e-way bill if they are delivered from a SEZ to a DTA (Domestic Tariff Area) or any other location.

  12. How do I create an e-invoice for SEZ?

    You may create e-invoices for your company using IRIS IRP. With IRIS IRP, you may create a single e-invoice using our tool, produce IRN in bulk using the Excel utility, extract IRN into your ERP using API Integration, or use a fantastic cloud platform to print bespoke invoices.

  13. Is GST applicable on SEZ units?

    Therefore, these goods and services are GST-free. In other words, supplies made to SEZ are deemed exports, and GST does not apply to them. As a result, suppliers of products to SEZs are permitted to Supply under a bond or LUT without paying the IGST and claim an ITC credit.

  14. Is an e-way bill required for less than 50 km?

    The e-way bill is a requirement for moving the products, with the exception of moving them within the same state between the consignor and transporter's locations if the distance is less than 50 km.

References

  1. https://dta.rajasthan.gov.in/

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