QUESTION

Sir, We have EOU Unit in Chemical Industries and start Job Work with SEZ Unit. We have to know that what is the procidure to send material and after complition of Job Work then is the procidure to remove material from SEZ unit. Is there any duty involce in this transection? If yes then which type of duty paid by EOU and SEZ. Rakesh

ANSWER

Facts of the case: An EOU unit sends material for job work to a unit in SEZ.

Law Applicable: As per sub section (2) of section 16 of IGST, the following shall be treated as zero-rated supply;

"supply of goods or services or both to a Special Economic Zone developer

or a Special Economic Zone unit"

Interpretation: SEZ is considered to be a foreign land for understanding and practical purpose of indirect taxes. When material is sent to SEZ the same is treated as zero rated supply. Refund needs to claimed on input ITC or outward tax paid as per section 54.

To get material back from SEZ, procedure of import needs to be followed. That is, bill of entry will be filed and custom duty will be paid. ITC of IGST paid under 3(7) of IGST will be available.

Conclusion: The procedure for sending material to SEZ and getting it back will be lengthy and the same will be treated as export and import respectively. The procedure of Job work challan can not be followed if job worker is in SEZ. Therefore it is advisable to get job work done from DTA rather than SEZ since it is a much simpler process without liability to pay tax.(Reply dt.21-03-2020)