SEZ Unit 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.
SEZ units often ask how they can get a GST refund on what they buy from suppliers in the domestic tariff area (DTA). The answer surprises many finance teams: in most cases, the unit does not claim a refund at all. Supplies to an SEZ unit for authorised operations are zero-rated, and the law gives the refund to the supplier. The unit's job is to make sure no tax is charged to it and to give the supplier the endorsement it needs.
Supplies to an SEZ unit or developer for authorised operations are zero-rated (s.16(1)(b) IGST). The first proviso to Rule 89(1) says the supplier files the refund: for goods after they are admitted in full into the SEZ, and for services with evidence of receipt, both endorsed by the specified officer of the Zone. The supplier must declare that tax was not collected from the SEZ unit (Rule 89(2)(f)). So the unit's aim is to receive supplies without bearing GST, by insisting on an LUT invoice or an IGST-paid invoice where the tax is not recovered from it, and to issue the endorsement promptly.
Why the refund sits with the supplier
The SEZ Act treats the Zone as outside the customs territory of India for authorised operations, and the ICAI Handbook on Refunds explains that zero-rating was extended to supplies to SEZs to relieve them of indirect taxes. The mechanism is on the supply side:
- the supplier either supplies under LUT and claims refund of unutilised ITC; or
- supplies on payment of IGST and claims refund of that IGST.
In both cases the application in RFD-01 is filed by the supplier. There is no separate refund category in which an SEZ unit claims back GST on its DTA purchases. The supplier's side is explained in SEZ supplier GST refund: with payment vs LUT, and our SEZ supplies refund service acts for suppliers filing these claims.
What the SEZ unit must do
| Step | Unit's role | Rule |
|---|---|---|
| Before ordering | Confirm the item or service falls within the unit's authorised operations | s.16(1)(b) IGST; Rule 89(1) proviso |
| Purchase order | Ask for an LUT invoice, or an IGST-paid invoice where the tax is not recovered from the unit | Rule 89(2)(f) |
| On receipt of goods | Get the invoice endorsed by the specified officer that the goods were admitted in full for authorised operations | Rule 89(1) proviso (a); 89(2)(d) |
| On receipt of services | Get the endorsement of receipt for authorised operations | Rule 89(1) proviso (b) |
| Payment for services | Pay the supplier and give payment details; the supplier's claim needs proof of payment by the recipient | Rule 89(2)(e) |
| After endorsement | Send the endorsed copy to the supplier quickly | – |
The "specified officer" means a specified or authorised officer under Rule 2 of the SEZ Rules, 2006 (Explanation to Rule 89(1)).
Which purchases qualify
The Handbook reproduces CBIC's clarification that procurements such as event management services, hotel and accommodation services and consumables qualify as zero-rated, subject to s.17(5) of the CGST Act, when received for authorised operations and endorsed by the specified officer. After the amendment to s.16 of the IGST Act, the "authorised operations" condition is explicit: supplies outside the authorised operations are ordinary taxable supplies, even if delivered into the Zone.
What goes wrong on the unit's side
1. Supplier charges IGST and collects it. If the supplier's invoice includes IGST and the unit pays it, the supplier cannot give the Rule 89(2)(f) declaration, so its refund is at risk, and the unit has borne tax on a zero-rated supply. Settle the tax clause in the purchase order: either an LUT invoice, or IGST on the invoice not recovered from the unit.
2. No endorsement, or partial endorsement. For goods, the endorsement must show that the goods were admitted in full. Short receipts should be reflected, otherwise the supplier's claim is reduced or rejected.
3. Services without payment proof. Rule 89(2)(e) needs details and proof of payment by the recipient. Delayed payment by the unit delays the supplier's claim.
4. Wrong tax type on the invoice. Supplies to or by an SEZ unit are inter-State supplies (s.7(5)(b) IGST), so the invoice should show IGST, not CGST and SGST.
Illustration: what the unit pays under each invoice type
An SEZ unit orders machine spares worth ₹10,00,000 (illustration) from a DTA supplier.
| Invoice type | Tax on invoice | Unit pays | Supplier's refund |
|---|---|---|---|
| Under LUT | Nil | ₹10,00,000 | Unutilised ITC via Statements 5 and 5A |
| IGST paid, not collected from unit | IGST shown, borne by supplier | ₹10,00,000 | IGST paid, via Statement 4 |
| IGST collected from unit (avoid) | IGST paid by unit | ₹10,00,000 + IGST | Refund blocked by Rule 89(2)(f) |
Check the applicable rate for your items in the current schedule; the example is only illustrative.
When the SEZ unit is itself the claimant
The unit claims a GST refund only where it is the supplier of a zero-rated supply, for example when it exports goods or services, or supplies to another SEZ unit, and meets the conditions of s.16 IGST. Then the ordinary zero-rated refund rules apply to it like any other supplier. Its DTA sales are a different matter: supplies by an SEZ unit to the DTA are inter-State supplies chargeable to IGST (s.7(5)(b) IGST), as the Handbook notes.
For more on the SEZ process in general, see GST refund for SEZ units and developers.
Need help with SEZ procurement and refunds?
Whether you are an SEZ unit tidying up purchase terms and endorsements, or a DTA supplier whose SEZ claims keep getting deficiency memos, we can review the paperwork and take the claim to sanction. See our SEZ supplies refund support, or the broader GST refund service.
Key takeaways
- An SEZ unit does not file a GST refund for its DTA purchases; the supplier does.
- Supplies must be for authorised operations and endorsed by the specified officer.
- Insist on an LUT invoice, or IGST on the invoice that is not recovered from the unit.
- Services need proof of payment by the unit to support the supplier's claim.
- The unit claims a refund only when it is itself making zero-rated supplies.
Read next
- Refund of tax on supplies to SEZ and the endorsement
- Statement 5 for SEZ supplies
- Zero-rated supplies, LUT and refund
- Supplies to EOU: deemed export refund by recipient
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.