written by | March 29, 2022

Special Economic Zone with GST and EWB Applications

Talking about SEZ, there are a few economic zones, which the government of India sets up only to promote exports, called Special Economic Zones or the SEZ. The SEZ means some areas are provided for business purposes only with special rules. The SEZ policy is maintained in many countries. The Government of India started the policy of Special Economic Zone in the year 2005. In these special areas, there are different trade and commercial laws to encourage and increase the speed of investment and generate employment. Some special rules are followed, like no customs duty, excise duty, income tax, minimum alternate tax, and dividend distribution tax on SEZ exports.

Now we are going to learn SEZ in detail. Stay tuned to read more about it.

Did you know?

Prior to the enactment of the SEZ Act, 2005, there were 7 Central Government Special Economic Zones (SEZs) and 12 State/Private Sector SEZs. Furthermore, 425 proposals for setting up Special Economic Zones have been approved under the SEZ Act, 2005. At present, there are 378 special economic zones, of which 265 are operational.

Special Economic Zone Act (SEZ)

There are a few areas in which the government of India started the policy with few special rules for import and export business. According to that policy (SEZ Policy), there will be no customs duty, no excise duty, no income tax or the minimum alternate tax. There will be no dividend distribution tax on exports or imports done in these areas. Now, if you purchase something from these SEZ areas, all foreign territories’ import or export rules will be applied. However, we purchased them from the same country only. Subsequently, even though they are situated in the nation limits (or same state), they will be treated as an unfamiliar region for charge purposes.

Many individuals don’t get these terms. Also, these are the terms utilised in our everyday exchanges, and we want to get them. Assuming you are likewise one of them and came here to comprehend that, you are perusing the right article. Here, in this theme, we will clarify the special economic zone act or SEZ act, GST, and EWB applications.

Also Read: Different Types of Industries- Primary, Secondary & Tertiary

Meaning of Special Economic Zone in India

India’s SEZ was first structured in tandem after looking at the success of this wonderful model of China. Today, there are 378 SEZ act areas or special economic zone act notified in total, out of which just 265 are operational. About 64% of SEZs are located in these states:

  •  Maharashtra,
  • Tamil Nadu,
  • Karnataka,
  • Andhra Pradesh,
  • Telangana.

It means that no income tax will be applied in these five states. And there will be many more rules applied to business work done in these areas (which we have stated earlier). The ministry made the Baba Kalyani-led committee of Commerce and Industry study, learned more about India’s current SEZ policy, and submitted its recommendations in November 2018. It was made with the broad objective of determining the SEZ policy towards adapting the World Trade Organisation (WTO) and bringing that in global best practices to harness the maximum potential and maximise the potential production of SEZs area.

Now suppose we want to purchase something from these special areas called special economic zones, then all the import or export rules of foreign territories will be applied to them. Like we purchased things from out of India. However, we purchased them from the same country only.

Special Economic Zone: Its Purpose

  •  SEZ is required for additional economic activities.
  •  It is very necessary to promote the export of goods and services.
  • To generate employment.
  • To promote domestic and foreign investment.
  • To develop the infrastructure.

Special Economic Zone: Key Incentives and Features

  • Duty-free import or domestic purchase of goods/things for the development, operation, and maintenance of SEZ units.
  • We don’t need to pay various taxes like Income Tax, Alternative Minimum Tax, etc.
  • In these areas, commercial external borrowing up to ₹3813.81 crores in a year without any maturity restrictions via accredited banking.
  •  We can have a single-window clearance for approval at the central and state level in these areas.

Also Read: Types of GST in India - What is CGST, SGST and IGST?

Meaning of Export and Import

The SEZ Act or the Special Economic Zone Act are considered as they are located in a foreign territory, and thus the transactions with SEZs are termed as exports and imports only. Now let’s have a look at what exports and imports are -

Export

Export means removing products from India from a unique monetary zone (SEZ) by any method of transport or Supply to sez under GST of merchandise/things or administrations from one unit or designer in the SEZ to one more unit in the equivalent or another SEZ.

Import

Import implies bringing something very similar from one more country to India by any method of transport or getting labour and products from one unit or designer in the SEZ by one more unit or engineer situated in a similar SEZ rules or another SEZ.

GST Laws on SEZ

To be under SEZ rules can be productive, somewhat while discussing charges. Any stock of labour and products is viewed as a zero-appraised supply to SEZ under GST. That implies these provisions fall in zero duty rate under GST. Supplies to SEZ under GST are liberated from GST and are viewed as products. Thus, the providers providing products to SEZs can:

  • LUT or Supply under bond with no instalment of IGST and can guarantee credit of ITC; or
  • Supply on an instalment of IGST and can guarantee the discount of duties paid.

Whenever a SEZ supplies products to its administrations, it will be viewed as an ordinary between-state supply, and for this situation, IGST will be applied to that.

The special case for this is the point at which an SEZ supplies merchandise or any administrations or the two of them to a DTA (Domestic Tariff Area) then, at that point, this will be considered the product to DTA and customs obligations and other import obligations will be completely payable by the individual who is getting these provisions in DTA.

E-Way Bill Rules for SEZ

An e-way bill is obligatory when you are conveying a few merchandise. Supply to SEZ under GST rule, carriers ought to have an e-way bill with them when they move merchandise, starting with one spot then onto the next, particularly if the worth of these products is more than ₹50,000. SEZ supplies are dealt with precisely as the other between state supplies. The SEZ engineers should follow similar EWB strategies as the others. Furthermore, if there should be an occurrence of provisions from SEZ rules to a DTA or some other spot, the enlisted individual of products will be answerable for the age of e-way charges.

An e-way bill contains all the details of the goods, which are being moved from one place to another, the purpose of the movement, the consignor and consignee, and transportation details.

An e-way bill must be generated before commencing movement.

Conclusion

A Special Economic Zone is a topographical locale with various tax collection and legal guidelines than different districts inside a similar country. This office is given to SEZs to increment unfamiliar speculations. Hence, even though they are arranged in as far as possible ( or the same state), they will be treated as a new space for charge purposes. That suggests any supply to or from an SEZ engineer or SEZ unit will be treated as a between-state supply, and all under GST, Integrated Goods and Service Tax (IGST) applies to all between state supplies. We hope you liked today’s article based on SEZ- GST and AWB applications.

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FAQs

Q: How is GST applicable in this case?

Ans:

As we explained earlier, the movement from an SEZ is noted down as an interstate movement. Then, in this case, the goods have moved out of the SEZ.

Q: When did the Special Economic Zone come to India?

Ans:

Special Economic Zones Act came to India in the year 2005.

Q: Is It possible for SEZ to claim back GST?

Ans:

Yes, there is a law under IGST law. Any supply of goods or services that the SEZ has made is considered zero-rated supplies, exempted from the tax and can be claimed to get refunded.

Q: How many Special Economic Zones are in India?

Ans:

Presently there are 378 SEZs notified, out of which 265 are operational.

Q: What do you understand by Special Economic Zone?

Ans:

SEZ rules or Special Economic Zone are specially defined geographical areas where business, economic activity, production, and other business activities are conducted. These areas can be from 10 to 10,000 hectares or can take more space.

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