Site navigation

A supplier makes an eligible supply of goods to an SEZ unit for its authorised operations, under a valid letter of undertaking. How is the supply treated under the IGST Act, 2017?

Question and options

A supplier makes an eligible supply of goods to an SEZ unit for its authorised operations, under a valid letter of undertaking. How is the supply treated under the IGST Act, 2017?

  1. An inter-State supply liable to integrated tax with no refund

  2. An intra-State supply liable to central and State tax

  3. A zero-rated supply that may be made without paying integrated tax

  4. An exempt supply, so credit on its inputs must be reversed

Answer and explanation

Correct answer: C - A zero-rated supply that may be made without paying integrated tax

Section 16(1)(b) of the IGST Act treats a supply to an SEZ unit for authorised operations as a zero-rated supply, and section 16(3)(a) lets it be made under a letter of undertaking without paying integrated tax. Section 7(5)(b) makes it inter-State even if the unit is in the supplier's State, and zero rating means credit on inputs is not lost.

Practice for these exams

Related exam syllabi

More solved explanations in GST - levy, supply, input tax credit, registration & returns