Discover the process of obtaining a refund for unutilized Input Tax Credit (ITC) related to supplies made to Special Economic Zone (SEZ) units or SEZ developers. This article explains the two options available to suppliers, the pre-conditions for claiming the refund, and the manner and procedure for filing the refund application.

Special Economic Zone (SEZ) is the area which is deemed as a foreign territory so any movement of goods and services are treated as exports and imports and any movement of goods or services to the unit of special economic zone comes under zero rated supply.

As per section 16 of the IGST Act, Zero Rated Supply includes supply of goods and services to a SEZ developers or an SEZ unit. The suppliers of goods and/or services to a SEZ developers or an SEZ unit has two options:

1. Supply under bond or LUT without payment of IGST and claim refund of unutilized ITC;

2. Supply on payment of IGST and claim refund of IGST paid on goods and/or services.

Any person who registered under GST, supply any goods and/or services to SEZ unit or SEZ developers, such supplier shall be eligible to claim refund of its unutilized input tax credit. Manner and procedure for claiming of amount of refund are contained in Rule 89 and 96A of the GST Rules.

As per proviso to Rule 89(1), in respect of supplies to a SEZ unit/developers, the application for refund shall be filed by the-

1. Supplier of goods after such goods have been admitted in full in the SEZ for authorized operations, as endorsed by the specified officer of the Zone;

2. Supplier of services along with such evidence regarding receipt of services for authorized operations as endorsed by the specified officer of the Zone.

Input Tax Credit

Pre-Conditions of claiming refund:

  • The taxpayer is registered with GST Department and holds an active GSTIN during the period for which refund is being applied for.
  • Form GSTR-1 and a valid GSTR-3B Return must have been filed for the relevant tax period.
  • Tax payer has supplied the goods or services to the SEZ developers or the SEZ unit for authorized operations.
  • All the conditions and restrictions specified in sec. 16 and 17 of the GST Act for availing the ITC must have been satisfied.

Formula for calculating Refund Amount

= [Turnover of zero-rated supply of goods (on LUT)+Turnover of zero-rated supply of services (on LUT)] *[Net ITC] / [Adjusted Total Turnover] 

Declaration/Statement/Undertaking/Certificate to be filled online

  • Declaration under third proviso to section 54(3)
  • Statement 5 under rule 89(2)(d) and rule 89(2)(e)
  • Statement 5A under rule 89(4)
  • Declaration under rule 89(2)(f)
  • Undertaking in relation to section 16(2)(C) and Section 42(2)
  • Self-declaration under rule 89(2)(f) if amount claimed does not exceed INR 2 Lakh, certification under rule 89(2)(m) otherwise.

Supporting documents to be additionally uploaded

  • Copy of GSTR-2A of the relevant period
  • Statement of invoices (Annexures-B)
  • Self-certified copies of invoices entered in Annexure-B whose details are not found in GSTR-2A of relevant Period.

Precautions:

  • The taxpayer has to upload documents as are required to be filed along with Form RFD-01, as notified under the GST Rules and the circulars issued in the matter and other such documents as the refund sanctioning authority may require.
  • Taxpayer has an option to upload 10 documents with the refund application, of size up to 5 MB each.
  • The statement uploaded by taxpayer would be validated with the data already declared by the taxpayer while filing return Form GSTR-1.
  • Only after data is validated, the taxpayer would be able to file the refund application.

Conclusion: Claiming a refund of unutilized Input Tax Credit (ITC) for supplies made to SEZ units or SEZ developers involves following specific procedures, meeting pre-conditions, and providing supporting documents. By understanding the rules, calculations, and precautions associated with the refund application, taxpayers can navigate the process smoothly and ensure compliance with GST regulations.

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Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

Author Bio

Qualification: CS
Company: Everest Tax Consultancy
Location: Sikar, Rajasthan, India
Member Since: 08 Jan 2023 | Total Posts: 5
Mr. Yogesh Verma is a qualified Company Secretary and he is practicing in field of Goods and Service Tax as a proprietor in Everest Tax Consultancy Firm from last five year. He is providing consultancy services to claim GST Refund, compliances of GST in case of Import-Export, LUT and other GST rela View Full Profile

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