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Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
SEZs are vital economic zones that provide businesses with tax incentives and simplified procedures.
A country’s economy is based on its ability to produce goods and services efficiently. One key driver of economic growth is the creation of Special Economic Zones (SEZs). SEZs play a crucial role in economic development by attracting investment, boosting exports, creating jobs, and fostering technological advancement. They provide a conducive environment for businesses to thrive, leading to economic growth and improved living standards. Let us understand what is SEZ in GST, and how it can help any country’s economy.
Special Economic Zones (SEZs) are designated areas within a country that operate under distinct economic regulations from the rest of the nation. These zones are established to boost industrial growth, attract foreign investment, and promote exports. SEZs provide businesses with various benefits, such as tax incentives, simplified customs procedures, and more relaxed regulatory requirements. The primary goal of SEZs is to create a conducive environment for business operations, stimulate economic activity, and create job opportunities.
Introduction of the Goods and Services Tax (GST) in India brought significant changes to the taxation system, impacting SEZs as well. Under the GST regime, SEZs enjoy special status and benefits. Supplies made to or by SEZs are considered zero-rated supplies. Any goods or services supplied to SEZs from the Domestic Tariff Area (DTA) or other SEZs are exempt from GST. Similarly, supplies made by SEZs to entities outside the SEZ are also exempt from GST.
An e-Way Bill is an electronic document required to move goods worth more than ₹50,000. It ensures compliance with and monitors goods transportation under the GST regime. The requirement for e-Way Bills for SEZs is similar to other areas but with specific provisions to account for the unique status of SEZs.
Generating an e-Way Bill for SEZ transactions involves the following steps:
This e-Way Bill ensures that the transportation of goods to and from SEZs is compliant with GST regulations and is monitored effectively.
SEZ transactions under GST primarily fall into three categories:
These include goods or services moved from the SEZ to another unit within the same SEZ, a different SEZ, or out of India. (in terms of the SEZ supplier)
This refers to goods or services brought into the SEZ from other parts of the country or from foreign territories. (in terms of the recipient in the SEZ)
When supplies are made from an SEZ to a non-SEZ area (excluding DTAs), it is treated as an interstate supply, and IGST is applicable.
Both import and export supplies involving SEZs require compliance with GST provisions to avail themselves of the benefits of zero-rating.
SEZs enjoy numerous tax benefits and exemptions under the GST regime, which include the following:
Supplies to and from SEZs are considered zero-rated, meaning no GST is levied. While the goods or services are taxed at zero, businesses can still claim a refund on the input taxes paid.
Businesses operating within SEZs can claim Input Tax Credit (ITC) on the inputs used to make zero-rated supplies. ITC allows businesses to reduce the tax they have already paid on inputs from their overall tax liability.
SEZ units enjoy exemptions from customs duties on the import of goods. This includes both raw materials and finished goods required for manufacturing or other operations.
Services provided to SEZs are exempt from GST, provided they are used exclusively for authorized operations.
These benefits significantly reduce the tax burden on businesses operating within SEZs, making them an attractive option for companies looking to maximize their profitability.
Operating within an SEZ requires specific registration and compliance procedures under the GST regime:
Adhering to these registration and compliance requirements ensures that SEZ units can fully leverage the benefits and exemptions provided under GST.
A Letter of Undertaking (LUT) is a document that exporters can file to export goods or services without payment of IGST. For SEZ units, the applicability of LUT under GST provides additional benefits:
This provision simplifies the export process for SEZ units, ensuring they can operate efficiently without the financial strain of IGST.
Special Economic Zones are crucial in boosting economic activity and promoting exports in India. Under the GST regime, SEZs enjoy numerous benefits and exemptions that make them attractive for businesses. SEZs offer a favorable environment for companies looking to enhance their profitability and operational efficiency, from zero-rated supplies and tax exemptions to simplified compliance procedures.
1
SEZ stands for Special Economic Zone, a designated area with distinct economic regulations to promote industrial growth, attract foreign investment, and boost exports by offering various incentives and simplified procedures.
2
Under the GST regime, supplies to and from SEZs are classified as zero-rated, meaning no GST is levied on these transactions. SEZ units can claim refunds on input taxes paid, enhancing their financial efficiency.
3
Supplies from SEZs to Domestic Tariff Areas (DTAs) are treated as imports into the DTA and are subject to GST. The recipient in the DTA must pay the applicable GST on these supplies.
4
GST simplifies SEZ tax compliance by providing zero-rated supplies and enabling input tax credit claims. This reduces tax liability and operational costs, fostering a conducive business environment within SEZs.
5
SEZ units and developers must obtain a separate GST registration and comply with the regular filing of monthly and annual returns. Additionally, they must maintain accurate records of all transactions to benefit from the GST exemptions and incentives.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
