As per the provisions of section 26 of SEZ Act, 2005, The SEZ unit shall be exempted from any duties of any law for time in force, on Goods brought/Service procured from DTA to a SEZ to carry out on the authorized operations by SEZ unit or Developer. Section 16 of IGST law, 2017 has been amended through Union Budget 2021, to restrict the scope of zero-rated supply under GST to only those supply of Goods or services or both for AUTHORISED OPERATIONS to SEZ unit. Relevant extract of section 16(1)(b) of IGST act is reproduced as under:
zero rated supply” means any of the following supplies of goods or services or both, namely:
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(b) supply of goods or services or both for authorized operations to a Special Economic
Zone developer or a Special Economic Zone unit.
The words for Authorised operations in section 16(1)(b) ensure that only supplies made for
Authorised operations will now be treated as zero-rated supplies.
The significance of authorized operations derives from the Special Economic Zones Act,
2005 (SEZ act). Authorised operations are Authorised by the Board of Approval, which
allows the developer to conduct operations authorized by the government. The development
commissioner has to grant a letter of approval setting out every operation that the SEZ Unit
may undertake.
Attention is also drawn to Rule 89 of CGST Rules, 2017, as per which a supplier supplying
goods and services to SEZ for Authorised operations as endorsed by the specified officer of
the Zone, is supposed to file a claim of refund. However, Section 16 did not mention
‘Authorized operations. Thus, the amendment to section 16 of IGST Act, 2017 provide
backing to the Rules. The relevant extract of rule 89 is reproduced as under:
Provided further 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 authorized operations, as endorsed by the specified officer of the Zone;
(b) supplier of services along with such evidence regarding receipt of services for authorized
operations as endorsed by the specified officer of the Zone:
Given the above background, it becomes important for us to understand the default list
services which are exempted from IGST if the same are used for authorized operations.
Currently 67 list of services are approved list of services which are permitted by all Unit
approval committees (UAC) as default list of services which are eligible for upfront IGST
exemption if the said services are used for “Authorised operations”
Consequent to implementation of GST Act, some State Government are not extending the
benefits of IGST exemption for default services, Since SEZs are exempt from IGST and the
above matter was placed before 80th Board of Approval (BoA) meeting held on 17th
November 2017 The BoA, after deliberations, approved the reiteration of the default list of 67
list of services to be used for the purpose of providing upfront IGST exemption.
In respect of Goods for which mechanism is prescribed in rule 30 of SEZ rules, wherein an
endorsement shall be given by the authorized officer that the goods have been admitted in
full into SEZ and only those goods are eligible for zero-rated exemption.
However, Service used by SEZ units for Authorised officers are intangible and it becomes
difficult for authorized officer to provide following confirmations:
(a) The services procured by SEZ unit are forming part of 67 default list of services; and
(b) The services are used for authorized operations of the SEZ unit
As a result of which the industry faced serious problems in obtaining endorsement as required in rule 89 for the purpose of filing refund application for supplies made to SEZ and also it was an operational challenge for SEZ unit/ Development commissioner office to have control over the services and quantum of services on which IGST exemption was claimed by SEZ units registered in their Zone.
Given the above background in respect of the need for a system in place for facilitating
“Endorsement for Service invoices”. The SEZ online portal introduced DSPF solely for the
purpose to solve the problem of getting the endorsement from authorized or specified officer
for services procured by SEZ unit/ developer.
A new Module to record and submit details of all Invoices pertaining to Service’s availed by
SEZ Units / Developers from DTA Suppliers as “Zero Rated Supply for Authorised
Operations” is being introduced and is called “DTA Service’s Procurement Form (DSPF)”
SEZ Units / Developers / Co-developers will be able to submit details of service invoices for
services availed from DTA during a month. 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.
(a) SEZ online system through Notice dated 5th Sep 2019 which directs for
implementation of the above DSPF form wherein its specified that “Details of all
service procurements online through this form” may be implemented as mandatory
process for service procurement from Oct’2019”.
(b) The notice also specified the approval Hierarchy in which it has specified that DSPF
can be approved by Authorized officer or verified by Authorized officer and referred to
Specified officer for approval;
Neither SEZ Act or SEZ rules prescribes the due date or periodicity in which the DSPF is required to be furnished by SEZ unit. However, the Macro is enabled for SEZ units to file DSPF on Monthly basis.
(a) 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 provided by SEZ unit is
approved is sent to registered mail ID of DTA service provider.
(b) Excel template has been provided to fill the necessary details and has to be attached
with DSPF form.
(c) Important Mandatory details are captured below for your reference:
(d) Details of Invoices (Type/Date/Number/Amount)
(e) Service Accounting Code(SAC) has to be selected from dropdown menu and service
description will come automatically
(f) DTA Supplier Email-ID
(g) SEZ needs to indicate whether supply is under bond/ Letter of Undertaking (LUT) or
with payment of IGST
(h) In case of without payment option – Bond/ LUT details need to be captured.
(i) Approved list of services has to be selected from the dropdown menu (66 approved list
of services). Recently approved Management Consultancy Service’s is not listed in
dropdown menu.
(j) If a particular service is specifically approved by UAC as approved service for
exemption, the said service description can also be selected under the description as”
(a) 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.
(b) Based on the practical experience. I have noted that most of the DSPF approval is
provided by Authorised officer and rarely the same is referred to specified officer.
(c) It is interesting to note that 2nd proviso to rule 89(1) of CGST rules 2017 explicitly
mentions that the endorsement shall be given by “SPECIFIED OFFICER”. The
relevant extract is reproduced as under:
Rule 89(1)(b) supplier of services along with such evidence regarding receipt of services for authorized operations as endorsed by the specified officer of the Zone:
(d) As a result of above, we have experienced that department has rejected the refund
application of the applicant for supplies made to SEZ on the ground that the
endorsement has been given by “Authorised officer” and not by “Specified officer”.
(e) The relevant definition of Authorised Officer (AO) & Specified Officer (SO) is
reproduced as under for ease of reference:
“Authorised Officer” means an Inspector or Preventive Officer, or Appraiser or
Superintendent of Customs posted in the Special Economic Zone and authorized by the
Specified Officer to discharge any of his functions under these rule.
“Specified Officer” in relation to a Special Economic Zone means Joint or Deputy or
Assistant Commissioner of Customs for the time being posted in the Special Economic
Zone
The DSPF Module provides either of them can endorse the said form but GST law mandates
endorsement by SO for which clarification is required to be issued to avoid unnecessary
litigation.
(a) When transaction is approved by DC office, email indicating approval will be sent to
Entity Approver. An email will also be sent to DTA Supplier. Email will provide the
confirmation of services procured by DTA and invoice information applicable to DTA
Supplier.
(b) Email also contains attachment DSPF form along with declaration which provides as
under:
“It is declared, herewith that our SEZ entity (Name of SEZ) has availed above detailed services from GST registered dealers for our Authorised operation as per our LOA. The Services are eligible to be availed by us as Zero-rated services under GST Law and Procedure. Our unit will not be claiming any IGST benefit against these invoices. GST dealers (Service Provider) is eligible to claim IGST benefit for theses invoices. We would maintain necessary records for services availed invoices and payments made so as to make it available for review by SEZ/ GST authorities. We also authorize, SEZ online system to release an abstract of the endorsement of the invoices to the concerned GST dealer (Service Provider) as per Email Id provided by us”
(a)Intimation of all the suppliers by SEZ unit about the aforesaid DSPF and populating
LUT number for each of the supplier in Vendor master for each of the FY is challenging
and time consuming as LUT number of DTA supplier is mandatory to be obtained for
DSPF.
(b)It has been noticed that few of the AO has been insisting SEZ units/Developers in
submission of physical copies of all the service invoices for which the endorsement is
proposed in DSPF form.
(c) Approval by AO instead of SO as required by GST law is causing undue hardship and
rejection of refund application filed by DTA service providers.