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There is a lot of confusion among the masses about the applicability of e-invoicing and SEZ units/ developers. The e-invoicing mandate presently has made it mandatory for businesses who have crossed the e-invoicing turnover limit i.e. have an AATO of Rs. 10 Cr. and more. E-invoicing is applicable for all B2B invoices/transactions and export transactions.
In this article, let us discuss e-invoicing and SEZ in detail.
What is SEZ?
Special Economic Zones, also known as SEZs, are specific geographic areas that exist in a nation and offer businesses easier tax and legal compliance. In a sense, SEZ can be thought as a Trade Capacity Development tool that has been designed to support the country's economic progress. Read more about SEZ Units Vs SEZ Developers here.
For commerce and taxes reasons, the Special Economic Zones are regarded as foreign territory; as a result, any goods or services delivered to a SEZ unit or developer are treated as Zero-Rated Supplies and are subject to 0% GST. On the other hand, any supply made from the SEZ will be viewed as a regular supply, and regular GST rates may be applicable in these cases.
E-invoicing and SEZ Units/ Developers: The Impact
There can be two scenarios here
- Supplies made by SEZ Unit/ Developer
- Supplies made to SEZ Unit/ Developer
Supplies made by SEZ Unit/ Developers
Two Notifications have been released so far related to e-invoicing and SEZ. According to the GST Notification (Central Tax) 61/2020 dated 30-7-2020 only SEZ Units are exempted from issuing e-invoices for their outward supplies. For SEZ Developers e-invoicing is applicable if they have specified turnover and fulfilling other conditions for e-invoicing mandate.
Supplies made to SEZ Unit/ Developers
All business-to-business (B2B), supplies to special economic zones (SEZs) (with or without payment), exports (with or without payment), and deemed exports are covered if your GSTIN falls inside the e-invoicing mandate. Therefore, an IRN and QR code will be generated by a regular taxpayer for any supply made to SEZ units or developers.
Important Points to Note: Even though the location of the supplier and the site of supply are the same, supplies to SEZ Unit/Developer are always treated as Interstate transactions. This is because the SEZ and export transactions are by default Interstate transactions defined in GST Act.
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