Section 8(6),8(7) and 8(8) of the CST Act deals with the exemptions available to a SEZ unit or SEZ developer from CST. When goods are sold to a SEZ unit or SEZ developer then no CST is payable by such unit or developer as per the above sub sections subject to fulfillment of certain conditions. The conditions and forms relating to such exemption are provided as follows for the benefit of all concerned.

What is SEZ: Before discussing the relevant provisions one need to understand what SEZ means. Full form of SEZ is Special Economic Zone. These are designated areas in countries that possess special economic regulations that are different from other areas in the same country. Moreover, these regulations tend to contain measures that are conducive to foreign direct investment. Conducting business in a SEZ usually means that a company will receive tax incentives and the opportunity to pay lower tariffs.

It is set up for export purposes. Such zone is treated as if it is a foreign country within India. Units in SEZ can import raw materials and capital goods without payment of customs duty and also procure them without payment of excise duty. All the products of a SEZ unit should be exported and if their final product is sold in India, excise duty equal to normal customs duty on such goods is required to be paid.

As per explanation to section 8(8) of CST Act the expression “special economic zone” has the same meaning assigned to it in clause (iii) to Explanation 2 to the proviso to section 3 of the Central Excise Act, 1944, which defines Special Economic Zone as a zone which the Central Government may, by notification in the official gazette, specify in this behalf.

Conditions for exemptions: Following conditions must be satisfied so as to claim exemption u/s 8(6) of CST Act.

1. The exemption from CST is available only if the sale is to developer of SEZ or unit in SEZ. Section 8(6) was amended w.e.f 10-09-2004, to extend the exemption to developer of SEZ also. Earlier the exemption was available only to the units in SEZ.

2. The SEZ unit can obtain goods for purpose of manufacturing, trading, production, processing, assembling, repairing, reconditioning, re-engineering, processing, packaging or for use as or packing material or packing accessories.

Whereas the Developer of SEZ can obtain goods for development, setting up, operation and maintenance of the zone.

3. The registered dealer in SEZ(developer of SEZ or SEZ unit as the case may be) should have been authorized to establish such unit in SEZ by authority specified by Central Government. It’s the Development commissioner of SEZ who is authorized to permit a person to set up unit in SEZ.

4. As per section 8(7) of CST Act the goods which the developer of SEZ or unit in SEZ can obtain without CST must be mentioned in the sales tax registration certificate of SEZ unit. Thus the sales tax registration certificate must be amended to include all these items which can be obtained without CST, in the certificate.

5. As per section 8(8) of CST Act the purchasing dealer has to submit the prescribed declaration(form I) to the authority prescribed u/s 8(4) (i.e assessing officer), obtained from Development Commissioner by the selling dealer and issued to the purchasing dealer by him.

Thus SEZ developer or SEZ unit will supply ‘I’ form signed by himself. This ‘I’ form in original should be submitted to the assessing authority by the selling dealer so as to prove that the goods have been sold to a SEZ developer/SEZ unit and consequential CST exemption.

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(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: amit@amitbajajadvocate.com, M +919815243335)

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16 responses to “A brief on exemptions available to SEZ unit or SEZ developer from CST under CST Act 1956”

  1. Murali Krishna says:

    Dear Sir,
    We are unit holder in Arshiya SEZ (FTWZ) Panvel, is CST/VAT applicable for sale from Arshiya SEZ unit to other unit which is 100% EOU ?

    Please advise.
    Regards,
    Murali Krishna

  2. Vijay Tambe says:

    If manufacturing company (ABC) received order from foreign (DEF) company country (like US,UK,Germany) in USD and payment will received in USD.
    Manufacturing company(ABC) supplies/export the material to GHI company located in SEZ (special economic zone) near kochi,kerala as per instructions of DEF-US,UK,Germany company for some material integration. GHI company will integrate manufacturing company ABC’s material in their material(GHI company) and further will export to others country( saudi,uae,oman)
    Is their required form I.
    If form I required or not please share me government circular/ notification.

  3. Sathyhadeep says:

    We are a pvt ltd company taking mainly painting works on contract executing projects to SEZ Units.
    Now we have to purchase a material from AP state to Telangana State SEZ Unit.
    The billing procedure will be Bill to Ship to…
    The vendor will raise the Invoice in our company name & the materials will be despatched to SEZ Unit..Kindly confirm whether the supplier will charge us Excise Duty and CST along with the product value.
    Or since the material is delivered to the end user who is SEZ unit is there any exemption in our purchases also.

  4. CA K B Bhutada says:

    whether contingent liability should be levied or not under CST Act, for non submission of “I” form by SEZ unit. If it is levied on which rate.

  5. SHIB DAS THAKUR says:

    SALE AGAINST I FORM COULD NOT BE CHANGED TO CST SALE 2%,SO IT WILL VILOTION OF LAW OF SEZ SALE.

  6. venkataramu says:

    what is the status for goods sold Under VAT within karnataka to SEZ units
    what decleration to be obtained

  7. NAGARAJU says:

    Dear sir,
    SEZ Purchase with in state give the any form or not. SEZ Purchase with in state exempt or vat(14.5% or 5%).

  8. sumitra says:

    is Service tax exempted on Training provided to SEZ units.

  9. sumitra says:

    Sir

    is Service Tax Exampled for SEZ units on Training provided.
    Kindly confirm

    Regards/Sumitra

  10. sunil gupta says:

    Sir,

    Ours is a SSI manufacturing unit in Punjab. We sold some goods under Form I to the customer in Andhra Pradesh in March 2014. Now after one year, the customer has informed us that they can not issue Form I. Now the customer is ready to issue C Form against 2% CST.

    Can we now change the Sales from I form to C form after collecting 2% CST. Can we file Revised CST Return for the period after changing the sales from I form to C form?

    Our sales tax officer is refusing to accept C Form with 2% CST plus interest for the delay. He says we cannot file a Revised Return also.

    Sales tax officer is insisting to pay full VAT tax on the sales, with interest and penalty or I form which the customer is not able to issue. However the customer is willing to give C Form.

    Can the sales tax officer refuse to accept C Form, when it is a genuine Inter-state sales with lorry receipt details etc.

    Please advice. Thanks.

  11. rmmahant says:

    sir,

    we have purchase Electrical materil form Benglore(A) against ‘C’ form in Maharashtra(B) and sales within maharashtra (C) against form I directly.

    sir pl reply this is correct transcation against for I Sales.

    Regards

  12. ajay sinha says:

    Form I should be issued quarterly or yearly ????????????????

  13. Ajay Mehta says:

    Can materials be supplied from Maharashtra against H Form to a contractor who in turn supplies to SEZ located out of the State . The materials are to be consigned directly to SEZ .

  14. shanker says:

    Dear Sir,

    SEZ Unit excise duty Exemption notification No

  15. Dhurjyoti Bharadwaj says:

    We ( Telecome Operator ) importing goods from SEZ Unit to the State of Assam, the Vendor raise CST@% against C Form on USD instead of INR. Now should we be able to issue C Form to Party if yes than why.

  16. P.Malleswaran says:

    Form-I Period, kinldy mentioned the period about the form I

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