Govt must resolve SEZ units' problems arising from definition of 'services'

SEZ service exports face DTA payment disputes, GST relief linked to strict compliance, and CBIC eases customs with a single all-India electronic bond system

We are a SEZ unit holding a letter of approval (LoA) for providing services. We have been exporting our services and earning foreign exchange. Most of our expenses are in rupees (INR). Last year, we provided some services in the domestic tariff area (DTA) for which we received payment in INR; however, our overall net foreign exchange earnings (NFE) were positive. We have been regularly submitting our returns on time. Now, our jurisdictional development commissioner says that we have violated our LoA condition by selling services in DTA against payment in INR. Please clarify. 

The definition at Section 2(f) of the SEZ Act, 2006 says that ‘services’ means ‘such tradable services which ...earn foreign exchange’. Since the definition of ‘services’ itself mentions earning foreign exchange as a condition, a view can be taken that any transaction where payment comes in INR for services is outside the purview of the LoA granted to you. However, in practical terms, it makes no sense to ask the DTA party to convert INR into foreign currency and thereafter you converting the foreign currency back into INR to meet your expenses. I think the Commerce Ministry should amend the provisions to avoid such useless and unproductive disputes that can benefit only the banks putting through the foreign exchange transactions at your cost. 

We are manufacturers. We had supplied certain goods to merchant exporters on payment of 0.1 per cent GST. The merchant exporter did not mention our goods and services tax identification number (GSTIN) and invoice number on the shipping bill. The GST officials are demanding full GST from us. Can we refuse to pay by saying that it is not our fault? 

No. Notification no. 41/2017-IT (Rate) and 40/2017-CT (Rate) both dated October 23, 2017, contain the same condition (x) that  ‘when goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of GSTIN and tax invoice of the registered supplier along with proof of export general  manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier.’ So, this is a condition of an exemption notification which benefit you took. That is why the GST officers are asking you to pay the differential tax. Para 2 in both the notifications says that ‘the registered supplier   shall not be eligible for the above-mentioned exemption if the registered recipient fails to export the said goods within a period of 90 days from the date of issue of tax invoice.’ 

We are furnishing many separate bonds for various purposes to the customs. Is there any way we can reduce this compliance burden? 

The Central Board of Indirect Taxes & Customs (CBIC) has already issued circular no.04/2025-Customs dated February 17, 2025, regarding a project named “Ekal Anubandh”, allowing trade to use a single All-India Multi-Purpose Electronic Bond with end-to-end automation., Thus, you can now submit a single bond, instead of various transaction-wise bonds being submitted across different ports, saving your time and costs. 

Business Standard invites readers´ SME queries related to GST, export and import matters. You can write to us at smechat@bsmail.in