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A brief on exemptions available to SEZ unit or SEZ developer from CST under CST Act 1956

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.

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)

View Comments (17)

  • 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.

  • 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.

  • 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.

  • 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

  • We are manufacturing unit, we received direct order to supply the material to SEZ unit, can we get the duty drawback and MEIS benefit??
    If yes, then send me the procedure.

    Thanks

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