SEZ Sales

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Girish (Querist)

03 November 2009 We have a unit in SEZ Surat, From SEZ we sell goods to other unit viz in SEZ, EOU outside Gujarat. While raising invoice we do not charge CST as SEZ are exempted from CST. Please advise whether I have to obtain Form I or Form C from the customers on such transaction outside Gujarat.
Thanks and Regards

Girish

ANIL JANGID

ANIL JANGID (Expert)

03 November 2009 purchasing unit issuing a statutory declaration in Form-I.

Girish

Girish (Querist)

03 November 2009 I asked because in Gujarat VAT dept are not demanding any Form for sale from SEZ, they just consider it as exemption and are not demanding any Forms, For your information I would like to clarify that we have cleared one assessement where they have not demanded any forms for the sales from SEZ

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

25 July 2025 Great question, and one that highlights the practical challenges of tax compliance for SEZ units under the **CST regime (pre-GST)**.

Let me break it down and clarify everything about **Form I / Form C** in the context of **SEZ sales** — specifically inter-SEZ and EOU transactions outside Gujarat.

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## ✅ Your Situation:

* You are an **SEZ unit in Surat, Gujarat**.
* You sell goods to:

1. **Other SEZ units outside Gujarat** ✅
2. **EOU units (Export Oriented Units) outside Gujarat** ✅
* You **do not charge CST**, treating the transactions as exempt under SEZ provisions.
* You're asking:

> Do you still need to collect **Form I** or **Form C** from the buyer?

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## ⚖️ Legal Framework:

### 📜 **1. Central Sales Tax Act, 1956 — Section 8(6)**

Sales to SEZ units are **exempt from CST**, **provided the buyer issues a declaration in **📄**Form I**.

### 📄 **Form I**:

* Issued by the **buyer SEZ unit**.
* Declares that the goods are purchased for **authorized operations**.
* Must be submitted to **seller’s Commercial Tax/VAT authority** to claim **CST exemption**.

### 📄 **Form C**:

* Relevant only when **CST is charged at concessional rate (2%)** on **interstate sales to registered dealers** (not applicable for SEZ exemption cases).

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## 📌 So, Here's the Correct Position:

| Buyer Type | CST Applicable? | Form Required |
| ------------------------------ | --------------- | ---------------------------------------------- |
| **SEZ Unit (Outside Gujarat)** | ❌ No (Exempt) | ✅ **Form I** required |
| **EOU (Outside Gujarat)** | ✅ Yes (2%) | ✅ **Form C** required |
| **SEZ within Gujarat** | ❌ No | ✅ **Form I** preferred (but practice may vary) |

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## 🧾 Gujarat VAT Dept’s Practice:

You're correct in noting that in **Gujarat**, VAT officers **sometimes don’t insist on Form I** for SEZ sales. This is:

* Due to internal circulars or lenient interpretations.
* But **this is not standard practice across India**.

To stay on the **safer side (especially for central assessments, audits, or refund claims)**:

> ✅ **Always try to collect Form I for sales to SEZs** and **Form C for EOUs** when CST is applicable.

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## ❗ Why It Matters:

Even if Gujarat VAT isn't asking for the forms now, **during audit or refund scrutiny**, or if central authorities (DGFT, CAG, or CBIC) get involved, **not having Form I may lead to denial of CST exemption** and demand of tax + interest.

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## ✅ Recommendation:

1. **Continue not charging CST** on sales to SEZ units.
2. **Collect Form I** from SEZ buyers (especially outside Gujarat).
3. **Collect Form C** from EOU buyers when CST @ 2% is applied.
4. **Keep your LoA, ARE forms, and SEZ documentation ready** in case exemption needs to be proven.

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