TDS on purchase of Scrap Metal from SEZ, Goods and Services Tax - GST

[vaibhav agrawal]

Whether TDS has to be deducted on scrap metal purchased from SEZ unit ?

Posts / Replies

[Sadanand Bulbule]

In terms of Section 7(5)(b) of the IGST Act reads as under:

Supply of goods or services or both,––

(b) to or by a Special Economic Zone developer or a Special Economic Zone unit;

shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

For more details refer Notification No. 25/2024-Central Tax, New Delhi, dated 9th October, 2024 issued under Section 51 of the CGST Act.

[Sadanand Bulbule]

Under Section 51 of the CGST Act, there is a saving proviso which reads as below:

Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.

So you need to check your facts.

[YAGAY andSUN]

In the context of scrap metal purchased from a Special Economic Zone (SEZ) unit, the issue of whether Tax Deducted at Source (TDS) is applicable depends on several factors that need to be evaluated in light of the IGST Act, CGST Act, and related notifications.

Here’s a breakdown based on the information you've provided:

1. Section 7(5)(b) of the IGST Act:

This provision states that the supply of goods or services to or by an SEZ developer or unit shall be treated as an inter-State supply. This is crucial because inter-State supplies are subject to the provisions of the IGST Act.

2. Notification No. 25/2024-Central Tax:

This notification (likely referring to a provision relating to TDS under Section 51 of the CGST Act) states that no TDS is required to be deducted if the location of the supplier and the place of supply are in the same State or Union Territory as the recipient's registration. This would typically apply to the purchase of goods (such as scrap metal) from an SEZ unit, depending on the location of both parties involved in the transaction.

3. Section 51 of the CGST Act:

Section 51 of the CGST Act deals with TDS provisions. It mandates that a buyer must deduct TDS at the applicable rates when making payments to a supplier, subject to certain exceptions. However, as per the proviso you mentioned, no TDS needs to be deducted if the location of the supplier and the place of supply are in the same State or Union Territory as the recipient’s registration.

4. SEZ Transactions and TDS:

• SEZ units are treated as deemed foreign territory for GST purposes, and supplies to or by an SEZ unit are considered as inter-State supplies, even if both parties are in the same state.
• If the recipient is registered in the same State or Union Territory as the supplier (i.e., both parties are within the same geographical region), TDS may not be applicable under the exemption provided in Notification No. 25/2024.
• If the location of the supplier and the place of supply is in different States or Union Territories, then TDS provisions under Section 51 would generally apply, and the buyer must deduct TDS.

Conclusion:

To determine whether TDS should be deducted on the purchase of scrap metal from an SEZ unit:

• If the location of both the supplier (SEZ unit) and the buyer is in different States or Union Territories, TDS would be applicable.
• If they are in the same State or Union Territory, TDS may not be applicable as per the proviso in Notification No. 25/2024.

It is essential to review the location of both the supplier and recipient carefully, as well as any specific exemptions or conditions that may apply to the transaction based on the nature of the goods and the entities involved.

[vijay kumar]

In my view, TDS is payable in view of amendment of Nofn. 50/2018 by Nofn.25/2024.. The amended nofn is posted below:

 

[Shilpi Jain]

In case of procurement from SEZ, you are required to file BoE and pay the applicable BCD and IGST. When SEZ is not liable for any tax on this, there is no question of doing a GST TDS.