Supply to sez
This query is : Resolved
16 March 2019
Dear Sir, We are supplying goods to SEZ under LUT. The ITC of Inputs is being used for payment of tax on others taxable supply is the procedure correct. Or we have to apply for refund for ITC used in Inputs which are being supplied to SEZ Unit
17 March 2019
This procedure is not right. You have to claim refund.
17 March 2019
Sir From which provision are you coming to the conclusion that we have to claim refund
26 July 2025
Here’s a clear explanation regarding **ITC on inputs used for supplies to SEZ units under LUT** and whether you should claim refund or adjust ITC against other taxable supplies:
---
### 1. **Supply to SEZ under LUT**
* Supplies to SEZ units made under a **Letter of Undertaking (LUT)** are **zero-rated supplies** under GST.
* No GST is charged on these supplies, but ITC on inputs and input services used for these supplies **can be utilized**.
---
### 2. **Use of ITC on inputs for supplies to SEZ**
* According to GST law (Section 16(3) and Rule 89(5) of CGST Rules, 2017):
* **ITC availed on inputs/input services used for zero-rated supplies can be claimed as refund.**
* Alternatively, ITC can be **used for payment of tax on other taxable supplies**.
---
### 3. **Can ITC on inputs for SEZ supplies be used for other taxable supplies?**
* Yes, **ITC on inputs used partly for zero-rated (SEZ) supplies and partly for taxable supplies** can be used for payment of tax on taxable supplies.
* But, you **cannot use ITC related exclusively to zero-rated supplies (to SEZ) for other taxable supplies** without refunding it.
---
### 4. **Refund of ITC on zero-rated supplies**
* If you are **not paying GST on zero-rated supplies (i.e., under LUT)**, you are eligible to **claim refund of accumulated ITC** on inputs/input services used for SEZ supplies under **Section 54(3) of CGST Act**.
* Refund claim is generally preferred to avoid accumulation of blocked credit.
---
### 5. **Summary**
| Scenario | Treatment |
| -------------------------------------------------------------------------- | --------------------------------- |
| Inputs used **only** for SEZ supplies under LUT | Claim refund of ITC |
| Inputs used for both SEZ and taxable supplies | Apportion ITC and use accordingly |
| Using ITC of SEZ supplies inputs for other taxable supplies without refund | **Not correct** |
---
### **Relevant Provisions**
* **Section 16(3) of CGST Act, 2017** — ITC to be used only for taxable supplies, refund for zero-rated.
* **Rule 89(5) CGST Rules, 2017** — Refund of ITC on zero-rated supplies.
* **Section 54(3) CGST Act, 2017** — Refund claim process.
---
If you want, I can help draft a note citing these provisions and explaining the correct procedure to your team or tax department. Would you like me to do that?
---
### 1. **Supply to SEZ under LUT**
* Supplies to SEZ units made under a **Letter of Undertaking (LUT)** are **zero-rated supplies** under GST.
* No GST is charged on these supplies, but ITC on inputs and input services used for these supplies **can be utilized**.
---
### 2. **Use of ITC on inputs for supplies to SEZ**
* According to GST law (Section 16(3) and Rule 89(5) of CGST Rules, 2017):
* **ITC availed on inputs/input services used for zero-rated supplies can be claimed as refund.**
* Alternatively, ITC can be **used for payment of tax on other taxable supplies**.
---
### 3. **Can ITC on inputs for SEZ supplies be used for other taxable supplies?**
* Yes, **ITC on inputs used partly for zero-rated (SEZ) supplies and partly for taxable supplies** can be used for payment of tax on taxable supplies.
* But, you **cannot use ITC related exclusively to zero-rated supplies (to SEZ) for other taxable supplies** without refunding it.
---
### 4. **Refund of ITC on zero-rated supplies**
* If you are **not paying GST on zero-rated supplies (i.e., under LUT)**, you are eligible to **claim refund of accumulated ITC** on inputs/input services used for SEZ supplies under **Section 54(3) of CGST Act**.
* Refund claim is generally preferred to avoid accumulation of blocked credit.
---
### 5. **Summary**
| Scenario | Treatment |
| -------------------------------------------------------------------------- | --------------------------------- |
| Inputs used **only** for SEZ supplies under LUT | Claim refund of ITC |
| Inputs used for both SEZ and taxable supplies | Apportion ITC and use accordingly |
| Using ITC of SEZ supplies inputs for other taxable supplies without refund | **Not correct** |
---
### **Relevant Provisions**
* **Section 16(3) of CGST Act, 2017** — ITC to be used only for taxable supplies, refund for zero-rated.
* **Rule 89(5) CGST Rules, 2017** — Refund of ITC on zero-rated supplies.
* **Section 54(3) CGST Act, 2017** — Refund claim process.
---
If you want, I can help draft a note citing these provisions and explaining the correct procedure to your team or tax department. Would you like me to do that?
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