GST, with the hope of billions to provide a better way to transact in a business and to eliminate the cascading effects under the previous tax system, it is the biggest tax reform in India ever. Although the system is very new to all and the taxpayers are not well-versed with the new indirect tax nomenclatures, we can expect that by the time it will go flawlessly. But, understanding the basics in detail about every aspect about GST is also important. So, today’s article is about how supply to Special Economic Zone (SEZ) takes place and what is the coverage of SEZ under GST regime.
Taxation Principle of WTO to SEZ
World Trade Organization has standardized some principle to make a supply with Special Economic Zones across the world. Under the sanctioned rules, exports to such SEZ areas are exempted from VAT/GST and conversely, the imports from such areas are taxed at the same rate as the local production within the country. So, considering a zero-rated tax on exports is a principle of WTO which is related to destination based taxation rules and the VAT free items here is described as zero-rated where the manufacturer can recover the costs and overheads used to get resources. As GST also depends on a destination principle of WTO, the exports made within the country go outside of it termed as zero-rated and the cost and overheads spend on resources are refunded in name of input tax to manufacturers back. The OECD guidelines for multinational enterprises on the neutrality of VAT is responsible for consistent business conduct with applicable laws.
Goods Export to SEZ
Under GST Regime, the above-mentioned guidelines remain the same and destination based taxation persists as zero-rated and a described benefit stays for the exports to Special Economic Zones (SEZs). The extension for the stated benefit is up to processing zones of the SEZs, but the supplies from this SEZ Areas to Domestic Tariff Area (DTA) is liable to describe as a taxable trade under the scope of GST rules and regulations.
Free VAT Laws Described Under Section 16 of IGST ACT
Zero-rated supplies are mentioned below regarding the goods and services or both, viz:
a. Export of Goods/Services or both to SEZ developer or unit
b. Supply of Goods/Services or both to SEZ developer or unit
According to the provisions of sub-section (5) of section 17 of CGST Act, the credit of input tax can be claimed for such zero-rated supplies, despite the supply perhaps being an exempt supply
A registered person under GST regime can claim the refunds in either case:
a. A taxpayer can supply the goods or services or both, under a bond or a letter of undertaking, fulfilling the conditions and procedure must be as mentioned in above provisions, without paying IGST and can claim the refunds of unused input tax credit
b. A taxpayer can supply the goods or services or both, fulfilling the conditions and procedure must be as mentioned in above provisions, with the payment of IGST and can claim the tax paid on the supply of the Goods or Services or both, according to the rules described under CGST Act.
From the reference of a definition defined under Special Economic Act, 2005 for Special Economic Zones and SEZ Developer, and also covered under Section 19 and 20 of Integrated Goods and Services Act(IGST), 2005. Some other special provisions are also described under IGST Act, 2005 pertaining procurement of Goods and Services on which taxes are not paid. GST law provides the refunds for taxes paid by the supplier for supplies made to a SEZ developer or SEZ unit-holder.
In accordance with Section 7(5), (b) of IGST Act, the supplies of Goods or Services or both to or by a developer or Unit Holder of SEZ will be termed as the supplies within the state and IGST would be chargeable with further refund mechanism. For an example, a taxpayer living in Bhuj supplies to Kandla SEZ in Gujarat, this supply must be termed as interstate supply and IGST will be charged, despite ref
No comments:
Post a Comment