SEZ Supplier GST Refund explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A supply to an SEZ unit or SEZ developer for authorised operations is a zero-rated supply, just like an export. The refund belongs to the supplier, not to the SEZ unit. As the supplier, you choose between two routes: supply under LUT and claim back the unutilised ITC, or charge and pay IGST and claim back that IGST. Both go through RFD-01, and both depend on the SEZ officer's endorsement.
Supplies to an SEZ unit or developer for authorised operations are zero-rated under s.16(1)(b) IGST. The supplier may supply under LUT/bond and claim refund of unutilised ITC (s.16(3), formula in Rule 89(4), Statements 5 and 5A), or supply on payment of IGST and claim refund of the IGST paid (s.16(4), Statement 4). The first proviso to Rule 89(1) says the supplier files the claim, for goods after they are admitted in full into the SEZ and for services with evidence of receipt, both endorsed by the specified officer. The relevant date is the due date of the return for the period (Explanation 2(ba) to s.54).
Who claims: the supplier, always
The ICAI Handbook on Refunds states that a supplier to an SEZ developer or unit for authorised operations can claim either refund of unutilised ITC on supplies without payment of tax, or refund of tax paid on supplies with payment of tax. The first proviso to Rule 89(1) places the application with the supplier:
- Goods: after the goods have been admitted in full in the SEZ for authorised operations, as endorsed by the specified officer of the Zone.
- Services: with evidence of receipt of the services for authorised operations, endorsed by the specified officer.
The SEZ unit itself does not file a refund for what it buys from you; its side of the process is covered in SEZ unit GST refund: DTA procurement. Our SEZ supplies refund service handles the supplier's claim under either route.
The two routes compared
| Point | Under LUT (without payment) | With payment of IGST |
|---|---|---|
| Law | s.16(3) IGST; Rule 96A LUT in RFD-11 | s.16(4) IGST |
| What is refunded | Unutilised ITC attributable to the zero-rated supply | IGST paid on the SEZ invoice |
| Amount | Rule 89(4) formula: (turnover of zero-rated supply × net ITC) ÷ adjusted total turnover | IGST shown in the invoices and paid |
| Statements | Statement 5 (Rule 89(2)(d)/(e)) and Statement 5A (Rule 89(4)) | Statement 4 (Rule 89(2)(d)/(e)) |
| Declaration | Rule 89(2)(f) | Rule 89(2)(f) |
| Cash flow | No tax outflow on the supply | Tax paid first, refunded later |
| Restriction | Needs a valid LUT before supply | Not available for goods notified under Notification 01/2023-IT |
Under both routes, the Handbook's Annexure lists the undertaking in relation to s.16(2)(c) and the self-declaration under Rule 89(2)(l) (claims up to ₹2 lakh) or CA certificate under Rule 89(2)(m) (above ₹2 lakh).
The Rule 89(2)(f) declaration: do not collect tax from the SEZ
Rule 89(2)(f) requires a declaration that tax has not been collected from the SEZ unit or developer. This matters most under the IGST-paid route. You pay the IGST to the government and claim it back; you do not recover it from the SEZ customer. If your invoice shows IGST and the SEZ unit has paid it to you, you cannot honestly give this declaration, and the claim runs into trouble. Price the contract on a tax-exclusive basis, with the IGST borne by you until refunded.
Endorsement: the document that makes or breaks the claim
For goods, Rule 89(2)(d) needs a statement of invoices with evidence of the endorsement that the goods were admitted in full into the SEZ for authorised operations. For services, Rule 89(2)(e) needs the endorsement plus details and proof of payment made by the recipient to the supplier for authorised operations.
The Handbook notes, citing CBIC's clarification, that even procurements such as event management, hotel and accommodation services or consumables qualify as zero-rated if received for authorised operations and endorsed, subject to s.17(5). Without the endorsement, the supply is treated as ordinary taxable supply.
Worked illustration: which route leaves more cash with you?
A manufacturer supplies goods worth ₹50,00,000 (illustration) to an SEZ unit in a quarter. IGST at 18% would be ₹9,00,000. Its ITC for the quarter is ₹6,00,000, and it has no other turnover.
| Item | LUT route | IGST-paid route |
|---|---|---|
| Tax paid on supply | Nil | ₹9,00,000 (₹6,00,000 from ITC, ₹3,00,000 in cash) |
| Refund claim | ₹6,00,000 unutilised ITC | ₹9,00,000 IGST |
| Cash out before refund | Nil | ₹3,00,000 |
| Formula risk | Rule 89(4) formula and net ITC scrutiny | Claim equals tax paid |
The LUT route avoids paying cash up front. The IGST-paid route can suit a supplier with large accumulated ITC it wants to convert, since tax paid out of ITC comes back as a cash refund. Check the rate for your product in the current schedule; the figures above are only illustrative. For the formula, see Rule 89(4): zero-rated refund formula.
Returns and relevant date
- Report SEZ invoices in Table 6B of GSTR-1.
- In GSTR-3B, show them as zero-rated supplies in Table 3.1(b). The portal checks that IGST paid in 3.1(b) is not less than the refund claimed on Table 6B invoices, so a mis-declaration in 3B blocks the IGST-paid claim.
- File within two years of the due date of the return for the period in which the supply was made.
- Zero-rated claims are eligible for provisional refund of 90% (s.54(6)); from 1 October 2025, Rule 91(2) provides for the RFD-04 order within 7 days of acknowledgement based on system risk evaluation.
For the statement format, see Statement 5 for SEZ supplies and refund of tax on supplies to SEZ and the endorsement.
Need help choosing a route or pushing an SEZ claim?
If you are unsure which route suits your ITC position, or a claim is stuck for want of endorsement or a 3B mismatch, we can review the invoices, endorsements and returns and file the claim. See our SEZ supplies refund support, or try the GST refund calculator for a quick estimate.
Key takeaways
- The supplier, not the SEZ unit, claims the refund on supplies to an SEZ.
- Two routes: LUT (refund of unutilised ITC, Statements 5 and 5A) or IGST paid (refund of IGST, Statement 4).
- Endorsement by the specified officer is essential for both goods and services.
- Declare that tax was not collected from the SEZ unit (Rule 89(2)(f)).
- The relevant date is the due date of the return for the period; provisional refund of 90% applies.
Read next
- GST refund for SEZ units and developers: special process
- Refund of IGST on exports with or without payment of tax
- Annexure B for GST refund format
- SEZ unit GST refund: DTA procurement
Disclaimer: Positions stated as on 30 September 2026, based on the CGST Act and Rules as amended, the Finance Act 2026, and the ICAI Handbook on Refunds under GST (January 2026). Verify current notifications before filing.