SEZ unit Sales
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
04 December 2009
How to sale SEZ Unit sales , Under CST & Vat?
How to sale SEZ Unit sales , Under CST & Vat?
05 December 2009
CST sale to SEZ Unit can be made against Form I and no tax shall be chargeable if it is for authorised operation of Unit
However Applicablibilty will depend upon the state law where SEZ unit is located , in some states it is zero rated sale and in some state vat is payable and refund can be claimed by the Unit
However Applicablibilty will depend upon the state law where SEZ unit is located , in some states it is zero rated sale and in some state vat is payable and refund can be claimed by the Unit
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 December 2009
Hi Chandra kishore,
One Example:
One IT Company Office located in madura nagar -hyd , plant/ Work Located IT Park Hydernagar- hyderabad.
SEZ Documents mentioned in Work place.
we supply material Office address.
we charge tax Vat 12.5% or SEZ sale . (Two Locations With in the state) But Client dont pay Vat 12.5%,they are saying Vat Exempted under SEZ Act)
how to solve this Case.
please suggest the best solution.
One Example:
One IT Company Office located in madura nagar -hyd , plant/ Work Located IT Park Hydernagar- hyderabad.
SEZ Documents mentioned in Work place.
we supply material Office address.
we charge tax Vat 12.5% or SEZ sale . (Two Locations With in the state) But Client dont pay Vat 12.5%,they are saying Vat Exempted under SEZ Act)
how to solve this Case.
please suggest the best solution.
Querist : Anonymous
Querist :
Anonymous
(Querist)
16 December 2009
One Example:
One IT Company Office located in madura nagar -hyd , plant/ Work Located IT Park Hydernagar- hyderabad.
SEZ Documents mentioned in Work place.
we supply material Office address.
we charge tax Vat 12.5% or SEZ sale . (Two Locations With in the state) But Client dont pay Vat 12.5%,they are saying Vat Exempted under SEZ Act)
how to solve this Case.
please suggest the best solution.
One IT Company Office located in madura nagar -hyd , plant/ Work Located IT Park Hydernagar- hyderabad.
SEZ Documents mentioned in Work place.
we supply material Office address.
we charge tax Vat 12.5% or SEZ sale . (Two Locations With in the state) But Client dont pay Vat 12.5%,they are saying Vat Exempted under SEZ Act)
how to solve this Case.
please suggest the best solution.
25 July 2025
You're raising a very practical and common issue seen in **intra-state sales involving SEZ units**, especially when goods are **invoiced or delivered to a non-SEZ location** (like a corporate office), but meant for use in the SEZ unit.
Let’s break it down and give you a clear legal and practical solution.
---
## ✅ **Situation Recap:**
* **Buyer**: IT company with registered **SEZ unit in Hydernagar, Hyderabad**.
* **Billing/Delivery address**: Office in **Madura Nagar**, also in Hyderabad (non-SEZ area).
* **Supplier (you)**: Supplying goods within the **same state (Telangana/AP)**.
* You charged **VAT @ 12.5%**, but the client claims **VAT exemption under SEZ Act**, saying it’s for their **SEZ operations**.
---
## 🔍 **Legal Framework:**
### 📜 **SEZ Act, 2005 – Section 26(1)(a)**
> SEZ units are **exempted from payment of taxes and duties** (including VAT, CST, etc.) on goods **required for authorized operations**, subject to rules and documentation.
### 📜 **SEZ Rules, 2006 – Rule 22**
> Specifies that for exemption to apply:
* Goods must be **consumed in authorized operations**,
* Supplied **directly to the SEZ premises**,
* Supported with proper documentation and approvals.
---
## ❗ Problem in Your Case:
* **Delivery is not made to the SEZ premises**, but to a **non-SEZ office (Madura Nagar)**.
* This breaks the **chain of evidence** that the goods are used for **authorized operations** in SEZ.
* Hence, **VAT exemption is not automatically applicable**.
> 📌 **Key Point**: SEZ exemption is **location-sensitive**. If goods are not directly delivered to SEZ unit, VAT/CST exemption **can be denied**.
---
## ✅ **How to Resolve It:**
### ✅ **Option 1: Route Goods Directly to SEZ Premises**
* Amend the **delivery address** to SEZ unit at Hydernagar.
* Mention SEZ LoA number on invoice.
* Obtain **Endorsement from SEZ Customs Officer** at the gate.
* Collect a **declaration** from SEZ unit that goods are for **authorized operations**.
This way, the sale qualifies as **SEZ supply**, and you **do not need to charge VAT/CST**.
---
### ✅ **Option 2: If Delivery at Non-SEZ Location (e.g., Madura Nagar)**
If the buyer insists on delivery to non-SEZ address, then:
* You must **charge VAT @ 12.5%** (as it’s not SEZ supply per state VAT law).
* Buyer can **claim refund of VAT** under **SEZ exemption rules**, but only if their state VAT department allows it (varies by state).
* They will need to maintain documentation to prove goods were **eventually transferred to SEZ** and used in authorized operations.
But:
> ⚠️ Most state VAT authorities **disallow** exemption if goods are **not directly delivered to SEZ**, or require a lot of compliance.
---
## 🔚 **Conclusion:**
> ✅ To treat a sale as **SEZ exempt (no VAT/CST)**:
* Ensure **direct delivery to SEZ unit**,
* Invoice shows SEZ details,
* Get endorsement from **SEZ customs**,
* Maintain proof of **authorized operations usage**.
> ❌ If goods are delivered to a **non-SEZ address**, you **must charge VAT**, and buyer may try to claim a **refund**, but it’s risky and uncertain.
---
## 📄 Documents You Should Request:
* Copy of **Letter of Approval (LoA)** for SEZ unit.
* Copy of **ARE-1 (if applicable)**.
* Declaration from buyer that goods are for **authorized operations**.
* Proof of **delivery to SEZ address**.
---
Let me know if you'd like a **sample invoice format for SEZ sales**, or a **buyer declaration format** — I can share it.
Let’s break it down and give you a clear legal and practical solution.
---
## ✅ **Situation Recap:**
* **Buyer**: IT company with registered **SEZ unit in Hydernagar, Hyderabad**.
* **Billing/Delivery address**: Office in **Madura Nagar**, also in Hyderabad (non-SEZ area).
* **Supplier (you)**: Supplying goods within the **same state (Telangana/AP)**.
* You charged **VAT @ 12.5%**, but the client claims **VAT exemption under SEZ Act**, saying it’s for their **SEZ operations**.
---
## 🔍 **Legal Framework:**
### 📜 **SEZ Act, 2005 – Section 26(1)(a)**
> SEZ units are **exempted from payment of taxes and duties** (including VAT, CST, etc.) on goods **required for authorized operations**, subject to rules and documentation.
### 📜 **SEZ Rules, 2006 – Rule 22**
> Specifies that for exemption to apply:
* Goods must be **consumed in authorized operations**,
* Supplied **directly to the SEZ premises**,
* Supported with proper documentation and approvals.
---
## ❗ Problem in Your Case:
* **Delivery is not made to the SEZ premises**, but to a **non-SEZ office (Madura Nagar)**.
* This breaks the **chain of evidence** that the goods are used for **authorized operations** in SEZ.
* Hence, **VAT exemption is not automatically applicable**.
> 📌 **Key Point**: SEZ exemption is **location-sensitive**. If goods are not directly delivered to SEZ unit, VAT/CST exemption **can be denied**.
---
## ✅ **How to Resolve It:**
### ✅ **Option 1: Route Goods Directly to SEZ Premises**
* Amend the **delivery address** to SEZ unit at Hydernagar.
* Mention SEZ LoA number on invoice.
* Obtain **Endorsement from SEZ Customs Officer** at the gate.
* Collect a **declaration** from SEZ unit that goods are for **authorized operations**.
This way, the sale qualifies as **SEZ supply**, and you **do not need to charge VAT/CST**.
---
### ✅ **Option 2: If Delivery at Non-SEZ Location (e.g., Madura Nagar)**
If the buyer insists on delivery to non-SEZ address, then:
* You must **charge VAT @ 12.5%** (as it’s not SEZ supply per state VAT law).
* Buyer can **claim refund of VAT** under **SEZ exemption rules**, but only if their state VAT department allows it (varies by state).
* They will need to maintain documentation to prove goods were **eventually transferred to SEZ** and used in authorized operations.
But:
> ⚠️ Most state VAT authorities **disallow** exemption if goods are **not directly delivered to SEZ**, or require a lot of compliance.
---
## 🔚 **Conclusion:**
> ✅ To treat a sale as **SEZ exempt (no VAT/CST)**:
* Ensure **direct delivery to SEZ unit**,
* Invoice shows SEZ details,
* Get endorsement from **SEZ customs**,
* Maintain proof of **authorized operations usage**.
> ❌ If goods are delivered to a **non-SEZ address**, you **must charge VAT**, and buyer may try to claim a **refund**, but it’s risky and uncertain.
---
## 📄 Documents You Should Request:
* Copy of **Letter of Approval (LoA)** for SEZ unit.
* Copy of **ARE-1 (if applicable)**.
* Declaration from buyer that goods are for **authorized operations**.
* Proof of **delivery to SEZ address**.
---
Let me know if you'd like a **sample invoice format for SEZ sales**, or a **buyer declaration format** — I can share it.
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