With the original Model GST Law, there loomed grey clouds over levy of GST on supplies to and by SEZ. As per the revised model IGST Law released by ministry of finance, ambiguity surrounding levy of tax on supplies to and by a SEZ Unit or Developer has been cleared. Such supplies will be subject to IGST.
What needs attention is that supplied to or by SEZ Unit/ Developer within the state will also be subject to IGST.
As per Section 3(6) of Model IGST Law “Supply of goods and/ or services to or by a SEZ developer or an SEZ unit, shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.”
Clearly, the law intends to create a deeming fiction whereby all supplies whether intra or inter state, to or by SEZ shall be deemed to be inter-state supplies and then be liable to IGST.
Additionally, what appears from reading of Zero-rated provisions, IGST paid by SEZ Unit/ Developer on supplies received by it can be claimed as refund. Concept of upfront exemption may not exist going forward under GST regime.