GST refund for SEZ supplies
Supplies to a Special Economic Zone (SEZ) unit or developer are treated as zero-rated under GST, similar to physical exports. Depending on whether the supply was made under a Letter of Undertaking or with tax paid, either the supplier claims the refund of accumulated input tax credit, or — in specific circumstances — the SEZ unit/developer claims a refund of tax paid, subject to an endorsement confirming the supply was received for authorised operations.
Why SEZ supplies are treated as zero-rated
Supplies made to a unit or developer within a Special Economic Zone are treated as zero-rated supplies under the IGST Act, on the same footing as physical exports out of India — the idea being that SEZs are treated as being outside the domestic tariff area for GST purposes, so tax shouldn't accumulate on inputs used for these supplies.
The supplier's route: LUT or IGST payment
A supplier to an SEZ unit or developer can, like a regular exporter, either supply under a Letter of Undertaking without charging IGST and claim a refund of accumulated ITC, or charge and pay IGST on the supply and claim that amount back as a refund. Both routes require the supply to be for "authorised operations" of the SEZ unit, which the receiving unit typically confirms through an endorsement on the tax invoice.
The SEZ endorsement requirement
A key document specific to SEZ refunds is the endorsement — the authorised officer of the SEZ confirms on the supplier's invoice (or a related document) that the goods or services were received for authorised operations. Without this endorsement, the supply may not be treated as a valid zero-rated supply for refund purposes, so it's worth building this into the transaction workflow rather than chasing it retroactively at refund time.
Shunya's CA team handles GST refund filing end to end — eligibility check, RFD-01 filing, and follow-up until credited.
Talk to a CA →Refunds claimed by the SEZ unit itself
In more limited circumstances — generally where the supplier has charged and collected GST rather than supplying under LUT, and where specified conditions are met — the SEZ unit or developer can itself apply for a refund of the tax paid on inward supplies used for authorised operations, rather than the supplier claiming it. Which party is entitled to claim generally depends on how the transaction was structured, so this is worth confirming with a CA before filing.
Common issues specific to SEZ refund claims
Beyond the standard documentation required for export-type refunds, SEZ claims are frequently held up by missing or incomplete endorsements, or by supplies that turn out not to qualify as being for "authorised operations" of the SEZ unit — a classification that depends on the SEZ unit's approved list of operations, which suppliers don't always have full visibility into.
Can both the supplier and the SEZ unit claim a refund for the same supply?
No — for a given supply, only one party is entitled to claim the refund, and which one depends on how the transaction was structured. If the supply was made under LUT without tax payment, the supplier claims the refund of accumulated ITC. If tax was charged and paid, and the specified conditions are met, the SEZ unit or developer may instead be the one entitled to claim a refund of the tax paid. The two routes aren't interchangeable or claimable in parallel for the same transaction.
This article is for general information only. For your specific situation, consult a practicing CA.
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