Impact of GST and E-way Bills on Special Economic Zones
The introduction of GST and E-way bills affected everyone, including the special economic zones (SEZ).
What is the Special Economic Zone?
A Special Economic Zone is a designated area where businesses can comply with the law more easily and pay easy taxes. Special Economic Zones are found within the country’s boundaries, but to differentiate them from the regular taxation system, they are treated as a foreign countries.
This is why the supplies transported to and from the special economic zones are handled slightly differently than usual. Simply put, even though the special economic zones are a part of India, they are considered foreign countries.
Accordingly, any supply transported to or from a special economic zone is considered an interstate supply, and IGST will be applied to such transactions.
What are exports and imports?
Since the Special Economic Zones are considered foreign territories, the transactions can be called exports and imports.
Exports
Exports refer to the supply of goods outside India from a special economic zone irrespective of the mode of transportation. It also refers to the supply of goods from one unit or developer in a special economic zone to another unit or developer within the same special economic zone or another special economic zone.
Imports
Imports refer to the supply of goods transacted to a special economic zone from a foreign country, irrespective of the mode of transport. It also refers to receiving goods from one unit or developer in a special economic zone to another unit or developer located within the special economic zone or to another special economic zone.
GST laws on Special Economic Zones
When it comes to taxes, living in one of the SEZs can be helpful to some extent. Supply of goods or services or both to an SEZ unit or developer is regarded as zero-rated. This implies that these supplies are GST-free. In other words, supplies made to SEZ have been deemed exports and are not subject to GST. So, the manufacturers and distributors of goods for SEZ can:
When a Special Economic Zone supplies goods or services or both, it will be regarded as an inter-state supply and subjected to IGST.
The only exception to this rule is when an SEZ supplies goods, services, or both to a Domestic Tariff Area (DTA). In this case, the SEZ will be excused from paying import taxes and customs charges because this is considered an export to the DTA.
Impact of E-way bill on Special Economic Zones
When transporting goods, transporters registered under GST must carry an e-way bill for goods being transported of value greater than Rs. 50,000. SEZ goods are handled similarly to other interstate goods. SEZ units or developers must also follow e-way bill practices that other businesses in the same industry follow. When supplies are sent from an SEZ to a DTA or another place, the registered person who facilitates the flow of goods is required to generate e-way bills.