GST, Separate Registration and SEZ unit in India

Introduced in the year 2000, the prime objective of Special Economic Zone (SEZ) is to develop the export scenario in India by attracting more foreign investment and offering an internationally competitive market. The SEZ locations are duty-free geographic regions where the economic laws are different from a country’s conventional economic laws. This article will elaborate the new face of SEZ in the light of the GST law.

SEZ locations in India

There are 433 SEZ locations located across India (according to data till 2015). In addition to this, there are 32 separate SEZ locations in India under in-principle approval. The category ‘SEZ’ extends over special zones like:

  • Free Trade Zone (FTZ)

  • Export Processing Zone (EPZ)

  • Free Zone (FZ)

  • Industrial Estate (IE)

  • Free Ports (FP)

  • Bonded Logistic Park (BLP)

  • Urban Enterprise Zone (UEZ), etc.

Separate Registration for SEZ unit under the GST Law

The rule number one of the Final Registration Rules of the GST law says that if a person who has a business unit in a Special Economic Zone, the entrepreneur needs to make a different registration application as a business vertical. While the person’s other business unit located in a non-SEZ zone falls under the normal state registration under the GST law.

As for example, if a company has 4 unit in SEZ locations and rest 3 units in Domestic Tariff Area (DTA), the company needs to go for total 5 registrations (4 for SEZ and 1 for DTA) under the provision of the GST law.

This separate registration process is increasing the burden of compliances and record maintenance for companies.


Apart from a separate registration process, the GST law has kept all the supplies as ‘zero rated’ that are made to SEZ locations. As a result, the suppliers who supply to SEZ locations have two options:

  • The supply is not charged with IGST

  • They have to supply with a cover letter for paying and refunding the input tax credit.

Moreover, if SEZ procures any raw material and goods or services from an overseas country for authorized operation, no Basic Customs Duty (BCD) and IGST is applicable on the same. If any supplier from SEZ makes an outward supply within India, the customers need to pay BCD and IGST and file a bill of entry (BoE). GST has subsumed Countervailing Duty (CD) and Special Additional Duty (SAD) which was prevailed in the previous indirect tax regime. In a nutshell, only BCD and Integrated Goods and Service Tax are charged on any supply that is made from SEZ. On the other hand, the buyers can avail IGST credit to set off against the CGST and SGST liability.

Some of the GST benefits and exemptions for SEZ operators are mentioned below:

  • Any supplies into SEZ is GST free and it is treated as export.

  • GST has made the previous refund procedures easy and thus the input tax credit system.

  • More convenient compliance requirement.

The end game

Whether it is SEZ, import or export; GST has a mixed bag for every business sphere in India. Somewhere it is simplifying the existing scenario, somewhere making it more complex for the common people. But in the case of SEZ, apart from a separate registration process, rest things are not much complex under GST as it has subsumed the previous indirect taxes into one single platform. The government is expecting that like other sectors, GST will show its positive color on SEZ too with the passage of time.

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