SEZ units set to get refund of cess on imports

New Delhi: The Centre will refund compensation cess levied on imported goods under Goods and Services Tax (GST) to businesses operating in special economic zones and their developers effective 2017.

The Central Board of Indirect Tax and Customs also directed issuance of refunds of 5% GST collected on food packages intended for the public distribution system (PDS). These refunds could total about ₹6,500 crore, people familiar with the matter said.

The move follows a recent GST Council decision exempting imports by SEZ units and developers retrospectively from July 1, 2017 -- the date of introduction of GST.


"Cess collected would be refunded and any notices served to SEZ units or developers would be refunded," a senior official told ET. These refunds would be issued within the next six months, the official added.

The GST Council's latest decision assumes significance in the light of Andhra Pradesh High Court ruling this January in a case that held no such exemption was available.

The official cited above said National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), an apex organisation of agricultural produce marketing cooperatives, will also get a refund for GST collected on food packs meant for the supply under PDS.

"The council had clarified that no GST is to be levied on food supplies meant for distribution under the PDS and a refund would be issued soon," the official said.

The GST Council in its 47th meeting in July 2022 decided to impose a GST of 5% on prepackaged and pre-labelled retail packs like wheat and millet rice as many companies were supplying such prepackaged items without brand names, misusing the exemption given to unbranded pre-packaged food.

However, in many instances, field formations sent notices to supplies of wheat, rice, wheat flour and pulses meant for PDS.