Mumbai: The GST draft rules require each unit in a special economic zone (SEZ) to seek a separate registration under the new tax regime, for each of the states where a business operation is carried on and where GST liability arises.
The draft registration rules released on April 1, now provide that a SEZ unit or SEZ developer shall make a separate application for registration as a business vertical, distinct from its other units located outside the SEZ zone.
Many large companies, especially in the Pharma, or IT-ITeS sector have set up units in SEZs. Thus, if an IT company has three units in an SEZ in Karnataka and four outside the SEZ also in Karnataka, this company will need four registrations, which include one each for the SEZ units and the other registration at the state level for the non-SEZ units collectively.
“Records will need to be maintained at unit level, rather than state level, which will add to the complexities,” says Bipin Sapra, indirect tax partner at EY-India.
“However, supplies to SEZ units are zero rated and need to be clearly identified. Maintenance of records at unit level, will facilitate this,” he adds. Under the zero rated concept, the supplier, supplying goods to a SEZ unit can do so without payment of taxes and yet it can claim refunds of input taxes on such supplies.