Special Economic Zone (SEZ) Under GST
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.
When it comes to taxes, there are certain benefits available to a SEZ. Any supply of goods or services or both to a Special Economic Zone developer/unit will be considered to be a zero-rated supply. This indicates that there is no GST tax applied to these supplies.
Put differently, supplies into SEZ are treated as exports and are not subject to GST. As a result, the vendors providing products to SEZs are able to:
Provide services under a bond or letter of undertaking without paying IGST and claiming an ITC ,or Provide services after paying the IGST and requesting a refund of taxes paid.
Any delivery of goods or services, or both, to any individual from a SEZ will be deemed a normal interstate supply and subject to IGST.
The only exception to this rule is when a SEZ exports goods or services, or both, to a Domestic Tariff Area (DTA). In this case, the SEZ is exempt from customs duties and other import levies, and the recipient of the supplies in the DTA will be responsible for paying these costs.
Under GST, when moving from one place to another transporters should carry an e-way bill if the value of these goods exceeds Rs.50,000. SEZ supplies are treated as the other inter-state supplies are treated. The SEZ units or developers will have to follow the same E-way bill procedures as the others in the same industry follow. In case of supplies from SEZ to DTA or any other place, the registered person who facilitates the movement of goods will be responsible for the generation of e-way bills.
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