Special Economic Zone Unit
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Deliverables
Compliance Report
Timeline
2 Days
(from receipt of all documents)
Meaning of Special Economic Zone (SEZ)
A Special Economic Zone (SEZ) is a dedicated zone wherein businesses enjoy simpler tax and easier legal compliances. SEZs are located within a country’s national borders. However, they are treated as a foreign territory for tax purposes.
This is why the supply from and to special economic zones have a little different treatment than the regular supplies. In simple words, even when SEZs are located in the same country, they are considered to be located in a foreign territory.
SEZs are not considered as a part of India. Based on this, it can be clearly said that under GST, any supply to or by a Special Economic Zone developer or Special Economic Zone unit is considered to be an interstate supply and Integrated Goods and Service tax (IGST) will be applicable.
Meaning of Export/ Import
The SEZ’s are considered to be located in a foreign territory and thus the transactions with SEZ’s can be classified as exports and imports.
Export means:
1. Taking goods or services out of India from a special economic zone by any mode of transport .
2. Supply of goods or services from one unit/developer in the SEZ to another unit in the same SEZ or another SEZ.
Import means:
1. Bringing goods or services into a special economic zone from a place located outside India, by any mode of transport.
2. Receiving goods or services from one unit/developer in the SEZ by another unit/developer located in the same SEZ or another SEZ.
GST Laws on SEZ
Being in a SEZ can be advantageous to a certain extent when it comes to taxes. Any supply of goods or services or both to a Special Economic Zone developer/unit will be considered to be a zero-rated supply.
That means these supplies attract Zero tax rate under GST. In other words, supplies into SEZ are exempt from GST and are considered as exports. Therefore, the suppliers supplying goods to SEZs can:
Supply under bond or LUT without payment of IGST and claim credit of ITC; or Supply on payment of IGST and claim refund of taxes paid.
When a SEZ supplies goods or services or both to any one, it will be considered to be a regular inter-state supply and will attract IGST.
The exception to this is, when a SEZ supplies goods or services or both to a Domestic Tariff Area (DTA), this will be considered as an export to DTA (which is exempt for the SEZ) and customs duties and other Import duties will be payable by the person receiving these supplies in DTA.
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FAQs
As stated earlier, the movement from an SEZ is considered to be an interstate movement. In this case, the goods have moved out of the SEZ, though it is moved within the same state of Karnataka, it will be considered as an Inter-state supply and IGST will be applicable on this supply.
