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This article seeks to highlight certain key differences between the Special Economic Zone (SEZ) units, Export Oriented Units (EOU) and Domestic Tariff Area (DTA) units[1] in terms of their various benefits and compliances from an indirect tax point of view.
| Subject | SEZ Unit | EOU Unit | DTA Unit |
| Area of operations / Setting Up | Can be set up only at designated sites notified as SEZ | Can be set up anywhere in India | Can be set up anywhere in India |
| Authority / approval for setting up | Approval required under the SEZ laws; to be granted by the Development Commissioner of the concerned SEZ | Approval required under the FTP; to be granted by the jurisdictional Development Commissioner | No approval required |
| Imports | All imports are exempt from payment of all types of customs duties (BCD, SWS, IGST, Cess, etc) | All imports are exempt from payment of all types of customs duties (BCD, SWS, IGST, Cess, etc) | Imports are allowed on payment of applicable customs duties (However, benefit of the advance authorization and EPCG Scheme can be availed) |
| Procurement from DTA | All procurements which are required for authorized operations are allowed without payment of applicable GST (under LUT) or on payment of GST (of which refund can be obtained) | Applicable GST is payable on such procurements (of which ITC is available) | Applicable GST is payable on such procurements (of which ITC is available) |
| DTA Clearances | All DTA clearances are allowed on payment of applicable customs duties (BCD, SWS, IGST, Cess, etc). Bill of entry required to be filed by the importer or the SEZ unit (on behalf of the importer) | All DTA clearances are allowed on payment of applicable GST. Additionally, benefit of BCD exemption availed on imported inputs used in the manufacture of finished product cleared in DTA is required to be surrendered / paid along with interest. Only tax invoice required to be issued | Applicable GST is payable on such clearances. Only tax invoice required to be issued. |
| Income Tax benefit | Withdrawn (deductions available to units’ setup prior to July 2020) | Withdrawn (deductions available to units’ setup prior to April 2012) | No benefits available |
| Erstwhile MEIS benefit | Available | Available | Available |
| Existing RoDTEP benefit | Not Available (based on press note and information available on ICEGATE portal, official / statutory document awaited) | Not Available (based on press note and information available on ICEGATE portal, official / statutory document awaited) | Available |
| Existing SEIS Benefit | Available | Not Available | Available |
| Duty Drawback benefit | Not available | Not Available | Available |
| Export on payment of IGST | Have the option to pay applicable IGST and later claim refund of the same | Do not have the option to pay applicable IGST and later claim refund of the same. Mandatory to supply the same without payment of applicable GST under LUT | Have the option to pay applicable IGST and later claim refund of the same |
| Compliances | A number of compliances (setting up, timely extension, APRs, QPRs, MPRs, ID Cards for employees) under the SEZ laws. Additionally, GST return filing related compliances required to be met. | A number of compliances (records required to be maintained as per the customs laws, setting up, timely extension / renewals, APRs, QPRs, MPRs). Additionally, GST return filing related compliances required to be met. | Only GST related compliances |
| Authorities to deal with | NSEZ authorities, GST authorities and customs authorities posed at the NSEZ | NSEZ authorities and GST authorities | GST authorities |
| Applicable Indirect Tax laws | SEZ Act, Customs Act and GST Act | FTP & HBP, Customs Act and GST Act | Customs Act and GST Act |
| Excise duty benefit | Fuel like HSD, natural gas etc can be procured without payment of excise duty for authorized operations. | Fuel like HSD, natural gas etc can be procured without payment of excise duty for authorized operations. | No benefit such available |
[1] DTA units are normal manufacturing / servicing / trading units which do not operate as a SEZ / EOU unit
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If a company established in a Domestic Tariff Area (DTA) provides IT services to a company established in a Special Economic Zone (SEZ), can this be classified as a Deemed Export? If so, can the SEZ company make payment to the DTA company in Indian Rupees (INR) or a foreign currency?
Dear Sir,
I have my EOU unit at Bhavnagar Gujarat Can I convert my EOU unit into SEZ unit ? What are procedure and rules to be followed.
Thanks & Regards
Dinesh Poojary
Export on payment of IGST- Views expressed for EOU is In correct. Need to be looked In to. EOU is also eligible subject to condition.
EOUs can export on payment of IGST subject to the condition that at the time of import IGST benefit has not been availed by EOUs.
The above table prepared by us broadly distingue the difference between SEZ vs EOU vs EOU. For specific transaction, we always have to refer the exceptions created under the law.