Question

We are situated at Noida Special Economic Zone and registered under GST. Please let us know whether provisions of section 9(3) for reverse charges are applicable on us for services taken inside SEZ and liable to pay reverse charges. if yes, can we apply for refund for ITC paid on reverse charge basis? In what form and how?
 

Answer

Facts of the Case: You have a unit in SEZ and you are procuring services. Input Services can be procured from both outside SEZ or from another unit within SEZ. Since it is not mentioned which case you referring to, we shall discuss both the cases.

Law Applicable: As per section 16(1) of IGST Act, any supply to a SEZ unit is treated as a Zero-Rated supply.
Moreover, any supplier supplying goods/services to SEZ unit shall either:
1. Make the supply without output GST and claim refund of input ITC ; or;
2. Pay output GST out of own pocket (without charging it from SEZ unit) and then claim refund of output GST


Interpretation:
Case 1: Supply received from outside SEZ
SEZ unit is not supposed to pay any tax whether under forward charge or reverse charge mechanism.
The supplier shall claim refund of input ITC or outward GST.

Case 2: Supply received from another unit within SEZ
Any and all such supplies have no tax treatment and therefore there is no question of forward charge or reverse charge.

Conclusion: SEZ unit is not supposed to pay any tax under 9(3) and thus there would be no question of ITC. (Reply dt.09/03/2019)