A guide to Special Economic Zone in GST and “What is SEZ in GST?”

Introduction

The Indian government began its policy with a few particular laws for import and export commerce in a few areas. There will be no customs duty, excise duty, income tax, or minimal alternate tax under that program (SEZ Policy). In these places, there will be no dividend distribution tax on exports or imports. If you buy something in these SEZ zones, all import and export rules from other countries will apply. In this article information on “What is SEZ in GST?” And other information on Special Economic Zone in GST (Goods and Service Tax) is mentioned.

What is SEZ in GST?

A Special Economic Zone (SEZ) is a designated area where firms can pay lower taxes and comply with fewer regulations. SEZs are restricted areas within a country’s borders. For tax reasons, however, they are considered a foreign territory. As a result, shipments from and to special economic zones are treated differently from conventional supplies. To put it another way, even if SEZs are located within the same country, they are considered foreign territory. Based on this, any supply to or from a Special Economic Zone developer or Special Economic Zone unit is deemed an interstate supply under GST, and the Integrated Goods and Service Tax (IGST) will apply.

SEZ Import and Export Meaning

• What is Export? 

Taking products or services out of India via any method of transport, or supplying goods or services from one unit/developer in a Special Economic Zone to another unit in the same SEZ or another SEZ.

• What is Import? 

Receiving goods or services from one unit/developer in the SEZ by another unit/developer in the same SEZ or another SEZ via any form of transportation is considered as an Import of goods or services.

Rules and Regulation of SEZ in GST

When it comes to taxes, being in an SEZ can be beneficial to some extent. Any supply of products or services, or both, to a developer or unit in a Special Economic Zone is considered a zero-rated supplier.

This signifies that these supplies are exempt from GST (Goods and Service Tax). To put it another way, supplies into Special Economic Zone are GST-free and count as exports. As a result, vendors who deliver items to SEZs can:

• Supply under a bond or LUT without paying IGST and claiming an ITC (Input Tax Credit).

• Supply with IGST (Integrated Goods and Service Tax) paid and claiming a refund of taxes paid.

When an SEZ provides products or services to anyone, it is deemed an ordinary inter-state supply and is subject to the IGST. When an SEZ delivers products or services, or both, to a Domestic Tariff Area (DTA), this is deemed an export to DTA (which is exempt for the SEZ), and the individual receiving these supplies in DTA will be responsible for customs duties and other import duties.

E Way Bill information for Special Economic Zone in GST

When transporting a small number of goods, an e-way bill is required. Carriers must carry an e-way bill with them when moving commodities from one location to the next under the GST law, especially if the value of the products is more than INR 50,000. SEZ goods are treated the same as other interstate commodities. Engineers in the SEZ should use the same E-Way bill strategies as the others. Furthermore, if provisions from SEZ rules are applied to a DTA or another location, the enlisted individual of items will be responsible for the age of e-way charges.

An e-way bill comprises all of the information on the products being carried from one location to another, as well as the reason for the move, the consignor and consignee, and transportation information. Before the beginning the movement, an e-way bill must be generated.

GST Refund for SEZ Exports and Supplies

According to the IGST Act of 2017, exports and supplies to special economic zones are “zero” rated. The term “zero-rated supply” refers to a product that is GST-free across its entire supply chain. In the case of exempted supply, however, only the output is exempted, and GST is charged on the input side.

According to the CGST Act, 2017, a person with GST registration who makes a zero-rated supply is allowed to seek a GST refund. The following are the two options:

• Supply goods or services under a bond or letter of undertaking without paying integrated tax and claiming a refund of unused ITC (Input Tax Credit) of SGST, CGST,  UTGST, and IGST.

• Payment of integrated tax on goods or services and demand of GST refund on tax paid.

Conditions for claiming GST Refund on Exports

The taxable person registered under GST must meet the following conditions in order to obtain a GST refund:

• The person in charge of the conveyance transporting the export products properly files an export manifest or export report that includes the number and date of shipping bills or export bills.

• Once the shipping bill and Export General Manifest (EGM) are filed, and a proper return is filed, the application for refund will be considered complete, and the refund process will begin.

A statement stating the number and date of invoices, as well as the appropriate Bank Realisation Certificates or Foreign Inward Remittance Certificates, must be submitted along with the refund application in the case of service exporters.

FAQs on Special Economic Zone in GST

1. Is it possible for an SEZ to get GST back?

Yes, there is an IGST statute in place. Any provision of goods or services made by the SEZ is regarded as zero-rated, meaning it is tax-free and can be claimed for a refund.

2. Is it necessary to develop EWB (E Way Bill)?

Because the movement of commodities from and to SEZ is deemed an inter-state supply of products with a value greater than INR 50,000, an EWB will be required.

3. If the products are worth more than INR 50,000, who should generate the E Way bill?

If the unit on SEZ does not create the EWB, the transporter may choose to generate it. Furthermore, if a party located in an SEZ is an unregistered dealer under GST and the transporter is a registered dealer, the transporter must generate an E Way Bill.

Conclusion

A Special Economic Zone (SEZ) is a geographical area with different taxation and legal rules than other districts within the same country. SEZs are granted this office in order to increase unfamiliar speculations. As a result, they will be treated as a new location for charging reasons, even if they are organized as closely as possible (or in the same state). That means any supply to or from an SEZ engineer or SEZ unit will be classified as a between-state supply, and all between-state deliveries will be subject to IGST.