SEZ billing

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Pradeep Mishra

Chartered Accountant

26 Points Posted on 06 January 2011

I have a query on billing to SEZ's. There are three trnsactin parties 1) SEZ who is the customer 2) Supplier ot SEZ and 3) sub-contractor for the supplier [vendor]. Material is manufactured at the vendors place and shipped directly to the SEZ customer place and billed to Supplier [party no.2]. ARE - I form is colelcted by the vendor from the SEZ customer. Excise is exempted and sales tax is charged as Nil.

The commerical transaction is between party no 1 and 2 and between 2 and 3. For the transaction between 2 & 3 VAT is not charges as the material is supplied to SEZ and hence exempt from tax.

Also transaction between 1&2 - 2 does not charge any tax as the material is sent to SEZ and hence nil tax charged.

Clarification required - whether the transaction between 2/3 - whether 3 should charge VAT / CST as applicable and VAT paid by 2 can be taken as input credit.

Replies (5)

U S Sharma

glidor@gmail.com

21670 Points Posted on 06 January 2011

here 3 is manufacturer, 2 is dealer and 1 is buyer (SEZ)
if 3 bills to 2 and 2 does not add any value to it, then its just paper work extension ..............
please inform DEPB involvement also, as i realize that party 2 is doing the transaction to avail DEPB benefit / drawback, as he is not issuing declaration of cenvat credit but party 3 is.
regarding VAT, yes party 3 has to charge vat to 2, it depends on 2 , how they will handle the things, as SEZ will not pay the VAT .

Pradeep Mishra

Chartered Accountant

26 Points Posted on 07 January 2011

Originally posted by : U S Sharma

There is no DEPB involvement - as party 3 & 2 are in india. Goods are mfg in india and supplied in India.

Can party 3 claim that since supply to SEZ is exempt it will not charge any tax on party 2 and party 2 will also not charge any tax on party 1 as it is SEZ.

Does party 3 claim the benefit of SEZ billing and and not charge VAT to Party 2"

here 3 is manufacturer, 2 is dealer and 1 is buyer (SEZ)

if 3 bills to 2 and 2 does not add any value to it, then its just paper work extension ..............

please inform DEPB involvement also, as i realize that party 2 is doing the transaction to avail DEPB benefit / drawback, as he is not issuing declaration of cenvat credit but party 3 is.

regarding VAT, yes party 3 has to charge vat to 2, it depends on 2 , how they will handle the things, as SEZ will not pay the VAT .

U S Sharma

glidor@gmail.com

21670 Points Posted on 07 January 2011

There is no DEPB involvement - as party 3 & 2 are in india. Goods are mfg in india and supplied in India.

Can party 3 claim that since supply to SEZ is exempt it will not charge any tax on party 2 and party 2 will also not charge any tax on party 1 as it is SEZ.

Does party 3 claim the benefit of SEZ billing and and not charge VAT to Party 2"

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party 3 can not avail zero rated billing as his bills are not issued in favor of SEZ (party1)but in favor of dealer ( party 2),

Party 2 will not charge vat, and get exemption certificate / form from SEZ.

ARE-1 /2/3 are related to discharge of "cenvat" duty only , it does not effect on VAT rules.

Raghavan

Accounts Executive

29 Points Posted on 13 May 2011

IF 1 is manufacturer from non-sez, and 2 is customer from sez . Wat is the billing procedure to be adopted by 1 to 2, and who are to be intimated by 1( for eg- range,sales tax,DEPB..etc). Thanks in advance.