Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 7-9-2017 Last Replied Date:- 16-7-2018 – Meaning of SEZ Special Economic Zones are specially delineated areas that are treated as foreign territories in the context of trade and tariff laws. A Special Economic Zone (SEZ) is a specified duty-free zone deemed to be a foreign territory within the country for the purpose of tariff and trade. The objectives of SEZ include promotion of goods and services leading to enhanced economic activities, investment promotion, development of infrastructure, creation of employment opportunities etc. SEZ s could be multiple product SEZ s, sector specific, IT sector, free trade and warehousing, gem and jewellery sector, biotechnology etc. SEZ s enjoy a host of fiscal and tax benefits. Indirect tax exemptions include customs duty, central excise duty, service tax, central sales tax, stamp duty and other miscellaneous taxes and duties. Direct tax exemptions include income tax, dividend distr
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ain incentive of setting up a unit in an SEZ is the relaxation in normally cumbersome procedure and much convoluted tax laws. Registration GST law is silent about separate registration of SEZ unit located in SEZ. Accordingly, SEZ unit will have to take registration under GST for either principal place of business or additional place of business. Rule 8 of the CGST Rule, 2017 require each unit in a Special Economic Zone (SEZ) to seek a separate registration under the new tax regime, for each of the States where a business operation is carried on and where GST liability arises. Accordingly, a SEZ unit or SEZ developer shall make a separate application for registration as a business vertical, distinct from its other units located outside the SEZ zone. Inter-State or Intra-State Trade Export of goods and/or services shall be considered as inter-state supply of goods and/or services. Section 7(5) of the IGST Act, 2017 provides that supply of goods and/or services, when the supplier is locat
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nder the erstwhile tax regime, imports by SEZs were not charged excise duty and central sales tax (a levy on inter-State transactions). However, some States levy value added tax. SEZs are governed by the Special Economic Zones Act, 2005. Sections 26(c), 26(e) and 26(g) of the SEZ Act, 2005, provides exemption from earlier indirect taxes to SEZ units or Developers. Section 26(c) deals with exemption from any excise duty on goods brought from the domestic market to an SEZ to carry out authorized operations by the units or developers. Similarly, Section 26(e) provides for exemption from the service tax on relevant services provided to SEZ units or developer. Section 26(g) of SEZ Act, 2005, offers tax exemption to SEZ units or developers from the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956. Zero Rated Supply As per section 16 of the IGST Act, 2017, Zero rated supply means any of the following taxable supply of goods and/or services, namely – (a) ex
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ly establishments of a distinct person in accordance with section 25(4) of the CGST Act, 2017. As per section 25(4) of the CGST Act, 2017, a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Therefore, to be called as export of service, above mentioned conditions needs to be satisfied. (b) Supply of goods and/or services to a SEZ unit or a SEZ developer from a supplier located outside SEZ area i.e., Domestic Tariff Area (DTA) shall be considered as a zero rated supply. Therefore, supply of goods and/or services to the SEZ units or Developers would be considered as zero rated supply but on other hand, supply of goods and/or services by the SEZ units or Developers from SEZ to DTA would be covered under the normal course of supply. Accordingly, such unit or developer will have
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therefore, will impact the working capital requirements temporarily (i.e., blockage of working capital) of such taxable persons. Therefore, for the exporters, SEZ developers and SEZ units, the facility of duty free imports/procurement of inputs for exports should be continued else it will lead to increasing requirement of working capital even for payment of IGST/CGST/SGST/UTGST. – Reply By ca sid – The Reply = Sir, What about supply by SEZ developer to a SEZ unit. – Reply By JAIPRAKASH RUIA – The Reply = From where we will get the Bill of Export Number if the material is supplied from DTA/EOU to SEZ – Reply By vijay kumar – The Reply = Procurement of goods and services by SEZ from DTA will not be taxable since they are zero rated. As far as imports are concerned, import of goods are exempted vide Nofn.64/2017-Cus dt.5.7.2017 and import of services vide Nofn.18/2017-Integrated Tax (Rate) dt.5.7.2017. Hence, parity with pre-GST period continues for SEZ units/developer. – Reply By Akshay
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