Getting endorsement from specified officer of SEZ for claiming refund of unutilized ITC on account of supply of services to SEZ

[Shivam Agrawal]

Governing Provisions

The relevant provisions of the law relating to Refund of unutilized ITC on account of supply of services to SEZ are reproduced below:

Section 26 of Special Economic Zones Act, 2005 exempts units/ developers in SEZ from payment of any duties or taxes on goods/ services procured from Domestic Tariff Area (DTA) for authorised operations.

Rule 30 of Special Economic Zones Rules, 2006 prescribes the requirement to obtain endorsement for goods/ services.

Section 16(3) of the IGST Act, 2017 provides that a registered person making zero rated supply shall be eligible to claim refund of unutilized input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed.

Section 16(1) ibid, provides that a Zero-rated supply is:

• export of goods or services or both; or
• supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit.

Section 54(3) of the CGST Act, 2017 provides that a registered person may claim refund of any unutilized input tax credit only in the following cases:

• zero-rated supplies made without payment of tax;
• where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council

Further, Section 54(4) ibid, requires that the application for refund shall be accompanied by such documentary evidence as may be prescribed to establish that a refund is due to the applicant.

Second proviso to Rule 89(1) of CGST Rules, 2017 provides that in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the -

(a) supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone;

(b) supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone

Explanation to Rule 89(1) ibid, provides that for the purposes of this sub-rule, "specified officer" means a "specified officer" or an "authorised officer" as defined under rule 2 of the Special Economic Zone Rules, 2006.

How to get Endorsement from the specified officer of the SEZ regarding receipt of services for authorized operations under second proviso to Rule 89(1)

Based on above provisions, it can be concluded that one of the primary requirements for claiming refund of unutilized ITC on account of supply of services to SEZ is to have an Endorsement from the specified officer of the SEZ regarding receipt of services for authorized operations under second proviso to Rule 89(1) ibid.

While there was already a functionality on SEZ Online system for facilitating endorsement of procurement of goods by SEZ from DTA as "Zero Rated Goods for Authorised Operations" and the data was already being shared with GSTN through DG Systems, there was no such system to get such Endorsement regarding receipt of services and the above provision to get invoices endorsed by SEZ officers became a hurdle in getting refund of such unutilised ITC.

After getting feedback and demand from DC Offices and SEZ Units that SEZ Online system should facilitate endorsement of Service Invoices also. A new Module to record and submit details of all Invoices pertaining to Services availed by SEZ Units / Developers from DTA Suppliers as "Zero Rated Supply for Authorised Operations" was introduced from October 2019 onwards called as "DTA Service Procurement Form (DSPF)"

Working of Module

Units / Developers / Co-developers will be able to submit details of service invoices for services availed from DTA during a month at SEZ Online system. Details of multiple invoices, issued by multiple different DTA suppliers during a month can be uploaded in a single transaction and submitted to DC Office for review and endorsement. Upload macro is available at (https://www.sezonline-ndml.com/doc/DSPF_ItemDetails_Upload_Template-Version-1.xlsm)

Features of DSPF Form

• Multiple invoices issued by multiple/ different DTA suppliers during a month can be uploaded in a single go and submitted to DC Office for review and endorsement.
• Entire process of uploading DSPF, Approval/Endorsement by SEZ officers is online including the acknowledgement to DTA that the services procured by SEZ unit is approved is sent to registered mail ID of DTA service provider.
• Excel template has been provided to fill the necessary details and must be attached with DSPF form.
• After submission of DSPF, it will be forwarded to Authorised officer (AO) for review and approval. AO can either approve the form (or) refer to specified officer (SO) for review and approval.