SEZ Units Can Get GST Refunds: Madras High Court

In a recent judgment, the Madras High Court gave important relief to companies operating in Special Economic Zones (SEZs). The Court said that SEZ units can claim refunds of GST (Goods and Services Tax) paid on zero-rated supplies — supplier disclaimers confirming they haven’t claimed a refund of same tax.

What’s the Issue?

SEZ units buy goods and services from suppliers in the Domestic Tariff Area (DTA). These supplies are considered zero-rated, meaning they should not have GST applied. However, sometimes GST is charged, and it is paid by the SEZ unit.

According to the Low, the supplier is to claim a refund of GST on zero-rated supplies. But what if the supplier doesn’t claim it? Can the SEZ unit claim it instead?

That’s exactly what happened in this case.

The Case of Urjita Electronics

Urjita Electronics, an SEZ unit, paid GST to its suppliers on goods and services meant for the SEZ. Then, it applied for a refund of this GST. However, the GST department rejected the refund, saying the supplier, not the SEZ unit, should have claimed it.

Urjita took the matter to the Madras High Court.

What Did the Court Say?

The High Court decided in favor of Urjita Electronics. Here's what it said:

• SEZ units can claim a refund of GST they have paid, but only if the supplier hasn’t already claimed it.
• Confirmation is needed from the supplier that they haven’t claimed or won’t claim a refund on the same transaction.
• Refund rules aren’t applicable for suppliers : SEZ units also have the right to claim if they paid the tax and meet the conditions.
• The earlier refund denial was wrong, so the case was resent to the tax officers to reconsider and issue the refund, along with interest.

What This Means for SEZ Units

This judgment is relevant for SEZ businesses. It makes it clear that:

If they end up paying GST on zero-rated supplies, they can get it back, as long as their suppliers don’t claim it first.

They need to keep proper records and get disclaimers confirmation from suppliers to prove it.

They should apply for refunds with all supporting documents in place.

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Conclusion

The Madras High Court’s decision helps reduce confusion and makes it easier for SEZ units to get GST refunds. It also highlights the importance of clear communication between SEZ units and their suppliers.