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GST Law : Separate Registration for SEZ units

Jun 05, 2017

SEZ units have always been in the most advantageous position in obtaining concessions and exemption from Government under various legal provisions relating to conduct of business including the taxation laws. Under the existing scenario of indirect taxes, SEZ Unit/ Developer is required to meet certain conditions and undertake specified compliance flowing through service tax law, VAT laws, Excise law etc to avail benefits/ exemptions. However, SEZ Unit has never been required to take a mandatory separate registration under any indirect tax law.

Proviso to Rule 1 of the Final Registration Rules under GST mandates that a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone.

A plain reading of the above provision creates a staunch requirement of separate registration for SEZ Unit/s from its other units as if it is a distinct business vertical.

Read: GST Benefits and Impact on Indian Economy

However a deep reading of the same raises the following questions in the minds of the readers leading to confusion over the requirement of registration of SEZ units under the GST law

Whether each SEZ Unit in a SEZ zone of the same Tax payer need to take a separate registration
Whether all SEZ units covered under one Zone of the same tax payer will be required to take one common GST registration
3. Whether all SEZ units in one particular state in different SEZ Zones will be required to take one common GST registration

Each of the above situations have been discussed below with reference to a practical example to arrive at a possible answer to such a situation.

Company XYZ having its Principle Place of Business in Bangalore has 3 SEZ Units and 5 units in Domestic Tariff area in Karnataka. The three SEZ units are located as 2 in Manglore SEZ and one in Karle SEZ in Bangalore.

Question 1.

As per the premise in question no 1, the two units in Mangaore SEZ zone should take two separate registration and the SEZ unit in Karle SEZ unit in Mangalore should take a separate Registration. In total the Company XYZ has to take 4 registrations in all.

This appears to be an acceptable interpretation as this interpretation draws support from the fact that every SEZ compliance is unit-wise in existing regime as well.

Question 2

In this case the SEZ units located in the Mangaolore SEZ zone will take one common registration and the one in Karle SEZ Zone will take a separate registration. Apart the separate registration would be needed for the domestic units. Thus in this situation in all the Company would take three registrations.

This explanation appears to be correct based on the plain reading of the proviso to Rule 1 with out thinking about the other situations. Just a dictionary meaning of the provision in the Registration rules and does not provide any logical support.

Read: Impact of GST on Indian Manufacturing

Question 3

In this situation on registration would be taken for all the three SEZ units located in Karnataka and one more for the units in the Domestic tariff area. Thus in all the company would take 2 registrations under this situation.

This interpretation is based on overall understanding and intention of registration provisions under GST. as per theProvisions of the GST Act, every person (Xyz Ltd.) is required to take registration in each state from which supply is made. Also, the unit (s) located in SEZ zones have to take a separate registration. This interpretation keeps government’s intention for online tracking of SEZ supplies and exemptions separately .

However, unless Government comes out with clear cut instructions in this regard, there appears to be no clarity in regrds to registration of SEZ units based on the present provisions contained in the GST Act and the Registration Rules.

This article was first published on Indiataxguide & LinkedIn by Geetha Varadarajan

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