GST Rulings

Can SEZ Unit Claim Refund of GST Input Tax Credit on Exports?

According to Section 54(3) of the CGST Act, refund of unutilised ITC is allowed in case of zero-rated supplies (viz., exports) made without payment of GST. The said sub-section does not distinguish between SEZ and non-SEZ applicants.

However, according to the second proviso to Rule 89(1) of CGST Rules, the application for refund “shall” be filed by the supplier of goods / services in respect of supplies to a SEZ unit / SEZ developer.

Further, as per Rule 89(2)(f) ibid, such refund application shall be accompanied by a declaration that GST has not been collected from the SEZ unit / SEZ developer, where the refund is on account of supply of goods / services to a SEZ unit / SEZ developer.

The law, in theory and practice, allows supplies to SEZ units either with or without payment of GST. For supplies with payment of GST, the tax component is paid by the supplier (located in the DTA) to the Government from its pocket. Thereafter, the supplier can apply for refund. There is no provision for suppliers located in DTA to pass on ITC to recipient(s) located in SEZ.

At this juncture, it is interesting to recall the judgment[1] of the Hon’ble High Court of Gujarat, which is distinguishable on facts. Therein, SEZ unit was permitted to claim refund of IGST distributed by Input Service Distributor (ISD) since no specific supplier can claim refund under the GST Act / Rules.

[1] R/Special Civil Application No. 15473 of 2019

Srinivasan V, Advocate