Sales tax rules apply in SEZs

CHATROOM

I wish to know if sales tax is applicable to a unit inside SEZ. We are an export-oriented unit in Noida Special Economic Zone. As per the definition of SEZ, it is a foreign territory outside India, in which case sales tax should not be applicable. I have read that sales tax registration is necessary but it is not applicable anywhere which makes no use of it.

The SEZ Act, 2005 and SEZ Rules, 2006 do not override the sales tax or VAT laws of the states. UP Sales Tax laws do not regard SEZ as foreign territory outside India.

Please let us know whether for taking credit under state VAT, the criterion is (i) 'input' or (ii) the 'VAT suffered', i.e., VAT paid while making purchases. If while making purchases, VAT was paid within the state, is the legal position that the state has no objection to allow credit for VAT paid on any purchase?

You can take input tax credit only if you are a registered dealer and you have a tax invoice from a registered dealer showing VAT paid on the purchases that you have made within the state.

We are exporting a substantial quantity of our production apart from the traded goods. In a particular case, we are proposing to import certain equipment from a country and diverting the same to a customer in another country without bringing the goods to India. We require the following clarifications: a) Whether bill of lading can be endorsed to our customer or should we ask the shipper to prepare fresh bill of lading in the name of our customer? b) We will be raising our invoice from our location in India. Is it OK ? Will it attract any sales tax ? c) What document can be given to authorised dealer in the absence of bill of entry as proof of importation since no material is imported into India.

If the goods are diverted without touching the Indian shores, the goods will not attract Indian tax laws. If the original voyage is for India and you want the goods diverted from a trans-shipment point, you may approach the shipping company, surrender the original bill of lading and ask for a switch bill of lading showing the voyage to ultimate port of discharge or destination. You can make an invoice in the name of the buyer and you have to set of those receipts against the payments that you want to make to the seller. Both remittances should be handled by the same bank. The documents required will be the shipping documents and the contracts copies. The Reserve Bank of India Master Circular on import of goods dated 1st July 2006 deals with the situation under the heading 'merchanting trade'.

Can we import goods free of cost in SEZs?

There is bar either in the SEZ Act 2005 or SEZ Rules,2006.

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