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Special Economic Zone (SEZ) – GST and EWB Applications in Brief

Updated on:  

08 min read

As every person is affected by the implications of GST and e-way bill, Special economic zones (SEZ) too are covered under its ambit.

Latest Update

29th August 2021
From 1st May 2021 to 18th August 2021, the taxpayers will not face blocking of e-way bills for non-filing of GSTR-1 or GSTR-3B (two months or more for monthly filer and one quarter or more for QRMP taxpayers) for March 2021 to May 2021.

4th August 2021
Blocking of e-way bills due to non-filing of GSTR-3B resumes from 15th August 2021.

1st June 2021
1. The e-way bill portal, in its release notes, has clarified that a suspended GSTIN cannot generate an e-way bill. However, a suspended GSTIN as a recipient or as a transporter can get a generated e-way bill.
2. the mode of transport ‘Ship’ has now been updated to ‘Ship/Road cum Ship’ so that the user can enter a vehicle number where goods are initially moved by road and a bill of lading number and date for movement by ship. This will help in availing the ODC benefits for movement using ships and facilitate the updating of vehicle details as and when moved on road.

18th May 2021
The CBIC in Notification 15/2021-Central Tax has notified that the blocking of GSTINs for e-Way Bill generation is now considered only for the defaulting supplier’s GSTIN and not for the defaulting recipient or the transporter’s GSTIN.

17th March 2021
1. The e-way bills portal has released an update stating that e-way bills cannot be generated with only SAC codes (99) for services. There should be a minimum of one HSN code belonging to goods mentioned mandatorily.
2. Vehicle type ODC is provisioned for transport mode ‘Ship’.
3. Transporters are provided with a report of e-way bills based on the assigned date.

22nd December 2020
1. The CBIC increased the distance per day in case of goods transported through vehicles, other than the over-dimensional cargo, for determining the validity, as follows:
(a) It is one day – For a distance of up to 200 km as against earlier 100 km
(b) An additional day is taken- For every additional 200 km or part thereof, as against previously notified additional 100 km or part thereof
2. Regarding blocking of the e-way bill where a taxpayer fails to file GSTR-3B, the provision has been amended to replace two or more months with two or more tax periods. The same has been changed to include the quarterly return filers.

16th November 2020
1. According to Rule 138E (a) and (b) of the CGST Rules, 2017, the e-way bill generation facility of a taxpayer will be restricted, if the taxpayer fails to file their Form GSTR-3B returns or statement in Form GST CMP-08, for tax periods of two or more.
2. On 1st December 2020, the system will check the status of returns filed in Form GSTR-3B or the statements filed in Form GST CMP-08, for the class of taxpayers to whom it applies, and restrict the generation of e-way bill in case of:
(a) Non-filing of two or more returns in Form GSTR-3B for the months up to October 2020; and
(b) Non-filing of two or more statements in Form GST CMP-08 for the quarters up to July to September 2020
3. From 1st December 2020 onwards, blocking of e-way bill generation facilities would be made applicable to all taxpayers, irrespective of their Aggregate Annual Turnover (AATO), according to the terms of Rule 138E (a) and (b) of the CGST Rules, 2017.
4. The blocking will take place periodically from 1st December 2020 onwards.
5. To continue generating e-way bill on the e-way bill portal, taxpayers are advised to file their pending GSTR-3B returns/GST CMP-08 statements immediately.

Meaning of Special Economic Zone (SEZ)

A special economic zone (SEZ) is a dedicated zone wherein businesses enjoy simpler tax and easier legal compliances. SEZs are located within a country’s national borders. However, they are treated as a foreign territory for tax purposes.

This is why the supply from and to special economic zones have a little different treatment than the regular supplies. In simple words, even when SEZs are located in the same country, they are considered to be located in a foreign territory.

SEZs are not considered as a part of India. Based on this, it can be clearly said that under GST, any supply to or by a Special Economic Zone developer or Special Economic Zone unit is considered to be an interstate supply and Integrated Goods and Service tax (IGST) will be applicable.

SEZ is Export

Meaning of Export/ Import

The SEZ’s are considered to be located in a foreign territory and thus the transactions with SEZ’s can be classified as exports and imports.

Export means:

  • Taking goods or services out of India from a special economic zone by any mode of transport or
  • Supply of goods or services from one unit/developer in the SEZ to another unit in the same SEZ or another SEZ.

Import means:

  • Bringing goods or services into a special economic zone from a place located outside India, by any mode of transport or
  • Receiving goods or services from one unit/developer in the SEZ by another unit/developer located in the same SEZ or another SEZ.

GST Laws on SEZ

Being in a SEZ can be advantageous to a certain extent when it comes to taxes. Any supply of goods or services or both to a Special Economic Zone developer/unit will be considered to be a zero-rated supply

That means these supplies attract Zero tax rate under GST. In other words, supplies into SEZ are exempt from GST and are considered as exports. Therefore, the suppliers supplying goods to SEZs can:

  • Supply under bond or LUT without payment of IGST and claim credit of ITC; or
  • Supply on payment of IGST and claim refund of taxes paid.

When a SEZ supplies goods or services or both to any one, it will be considered to be a regular inter-state supply and will attract IGST.

The exception to this is, when a SEZ supplies goods or services or both to a Domestic Tariff Area (DTA), this will be considered as an export to DTA (which is exempt for the SEZ) and customs duties and other Import duties will be payable by the person receiving these supplies in DTA.

E-Way Bill Rules for SEZ

Under GST, transporters should carry an e-way bill when moving goods from one place to another if the value of these goods are more than Rs.50,000. SEZ supplies are treated how the other inter-state supplies are treated. The SEZ units or developers will have to follow the same EWB procedures as the others in the same industry follow. In case of supplies from SEZ to a DTA or any other place, the registered person who facilitates the movement of goods shall be responsible for the generation of e-way bills.

Let’s understand this with an example:

  • XYZ is and unit in an SEZ located in Karnataka
  • A is the recipient of goods manufactured by the SEZ and is located in Bangalore.
  • The value of the goods being transported this time is Rs. 75000.

Frequently Asked Questions

How is GST applicable in this case?

As stated earlier, the movement from an SEZ is considered to be an interstate movement. In this case, the goods have moved out of the SEZ, though it is moved within the same state of Karnataka, it will be considered as an Inter-state supply and IGST will be applicable on this supply.

Is EWB required to be generated? If yes, who is supposed to generate it?

Since the movement of goods from and to SEZ is considered as an inter-state supply of goods and the value of this supply is more than Rs. 50,000, EWB will have to be generated. XYZ is required to generate an EWB. The transporter may choose to generate the EWB if XYZ does not generate it. Further, it is important to note that, if XYZ is an unregistered dealer under GST, and ‘A’ is a registered dealer, ‘A’ will have to generate the EWB.

To know more about how a SEZ unit or developer should generate e-way bill, click here.

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