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.
Pre-Conditions of claiming refund:
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
Supporting documents to be additionally uploaded
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.
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.