This is
where documents such as:
- Letter of Approval (LOA),
- Approved list of goods/services,
- DTA Procurement Form (DPF),
- DTA Service Procurement Form
(DSPF), and
- Endorsement from Specified Officer become
critically important.
A supplier must understand not only the GST provisions but
also the SEZ procedural framework to avoid tax disputes and refund rejections.
1.
Meaning of LOA (Letter of Approval)
The Letter of Approval (LOA) is an approval issued by
the Development Commissioner of the SEZ to an SEZ unit or SEZ developer under
the SEZ Act, 2005.
The LOA
authorizes:
- establishment
of the SEZ unit,
- nature
of business activities,
- approved
operations,
- permitted
procurement and imports.
In simple
terms:
LOA is the foundational approval proving that the entity is a
legally approved SEZ unit/developer.
However, merely having an LOA is not always sufficient for
GST zero-rating benefits.
2.
Is LOA Alone Sufficient?
Practical
Position – NO
In GST
assessments and refund proceedings, officers generally insist on:
- LOA,
- Approved list/Annexure of goods and
services,
- SEZ online approval forms,
- Endorsement from specified officer.
The reason
is simple:
- LOA confirms SEZ status,
- Annexures
confirm whether the particular goods/services are approved for authorized
operations.
Therefore:
LOA establishes existence of SEZ unit, but annexures
establish eligibility of specific procurement.
3.
What is the “Approved List” or Annexure?
After
issuance of LOA, the SEZ authorities approve:
- list of goods,
- list of services,
- capital goods,
- consumables,
- input services required for
authorized operations.
These approvals are generally issued as annexures or approved
procurement lists.
4.
Why is Approved List Important?
GST
zero-rating is available only if:
- goods/services are used for
authorized operations.
Therefore,
during audits or refund verification:
- authorities compare the supplier
invoice
with - approved annexure list.
If the
supplied item is not appearing in the approved list, authorities may deny
zero-rated treatment.
5.
DTA Procurement Forms – DPF (Data Procurement Form) and DSPF (Data Service
Procurement Form)
Supplies
from Domestic Tariff Area (DTA) to SEZ are generally processed through SEZ
online systems.
A.
DPF – DTA Procurement Form
Used for:
- procurement of goods from DTA into
SEZ.
Purpose:
- approval and tracking of inward
movement of goods into SEZ.
The form
typically contains:
- supplier details,
- GSTIN,
- invoice details,
- description of goods,
- quantity/value,
- purpose/use,
- approval references.
B.
DSPF – DTA Service Procurement Form
Used for:
- procurement of services by SEZ
units from DTA suppliers.
Purpose:
- approval of services for authorized
operations.
Contains:
- service description,
- vendor details,
- service period,
- value,
- approval references.
6.
SEZ Online Portal Processing
Most SEZs
now process procurements through SEZ online systems.
Typical
process:
|
Step |
Activity |
|
1 |
SEZ unit
raises DPF/DSPF |
|
2 |
Internal
approval by SEZ unit |
|
3 |
Submission
to Specified Officer |
|
4 |
Approval/endorsement |
|
5 |
Supplier
supplies goods/services |
|
6 |
Endorsed
invoice generated |
7.
What is Endorsement from Specified Officer?
The
“Specified Officer” is an officer authorized under SEZ law to supervise SEZ
operations.
The
endorsement confirms:
- goods/services were actually
received in SEZ,
- supplies are for authorized
operations.
This
endorsement is one of the most important documents under GST.
8.
Why is Specified Officer Endorsement Critical?
Under GST
refund procedures, endorsement acts as evidence that:
- zero-rated supply conditions are
fulfilled.
Without
endorsement:
- refund claims may be rejected,
- zero-rating benefit may be
disputed.
9.
Documents to be Verified Before Supply
A.
Mandatory Basic Documents
|
Document |
Purpose |
|
GST
Registration |
Verify SEZ
status |
|
LOA |
Confirm
SEZ approval |
|
Approved
Annexure List |
Verify
authorized goods/services |
|
DPF/DSPF |
Procurement
authorization |
|
Purchase
Order |
Commercial
documentation |
|
LUT copy |
If supply
without IGST |
B.
Additional Important Documents
|
Document |
Importance |
|
SEZ online
approval screenshot |
Audit
support |
|
Authorization
letter |
Authorized
signatory verification |
|
Service
agreement |
For
service supplies |
|
Delivery
instructions |
Movement
evidence |
10.
Pre-Supply Verification – Practical Checklist
Before
issuing invoice, supplier should verify:
Goods
Supply
- Whether goods appear in approved
annexure.
- Whether DPF is approved.
- Whether SEZ GSTIN is valid.
- Whether place of delivery is SEZ
premises.
- Whether LUT is valid (if no IGST
charged).
Service
Supply
- Whether service appears in approved
service list.
- Whether DSPF is approved.
- Whether service relates to
authorized operations.
- Whether service location and
agreement support SEZ usage.
11.
What if Goods/Services Are NOT in Approved Annexure?
This is one
of the most critical practical issues.
Goods
Not Approved for Authorized Operations
If supplied
goods/services are NOT covered in:
- approved annexure,
- DPF/DSPF,
- authorized operations approval,
then supply
may lose zero-rated benefit.
In such
cases:
- supplier should generally treat
supply as normal taxable supply.
12.
Which Tax Should Be Charged – IGST or CGST/SGST?
The answer
depends on place of supply provisions.
A.
Supply to SEZ Is Always Inter-State Supply
As per
Section 7(5)(b) of IGST Act:
Supply to or
by SEZ is treated as inter-state supply.
Therefore:
Even if
zero-rating benefit is denied,
the transaction generally remains:
- an inter-state supply.
Hence:
- IGST should be charged.
B.
Practical Interpretation
|
Scenario |
Tax Treatment |
|
Approved
for authorized operations |
Zero-rated
(with LUT or IGST refund route) |
|
Not
approved for authorized operations |
IGST
applicable as normal taxable inter-state supply |
Thus:
If goods are
not covered in annexure/authorized operations, supplier should generally raise
invoice with IGST, not CGST+SGST.
13.
Can CGST & SGST Ever Apply?
Normally,
no.
Because
supplies to SEZ are specifically deemed inter-state supplies under IGST Act
irrespective of location.
Therefore:
- CGST + SGST usually should not be
charged on SEZ supplies.
14.
Reporting in GSTR-1 and GSTR-3B
One of the
most important compliance aspects is proper GST return reporting.
Incorrect
reporting frequently results in:
- refund rejection,
- GST notices,
- mismatch proceedings,
- denial of zero-rated benefit.
A.
Where to Report Eligible Zero-Rated SEZ Supplies
In
GSTR-1
Table
6B – Supplies Made to SEZ Unit/Developer
Report
supplies here when:
- goods/services are for authorized
operations,
- approved annexure exists,
- DPF/DSPF approval available,
- endorsement from specified officer
available.
Applicable
for:
- supply under LUT without payment of
IGST,
- supply with payment of IGST.
In
GSTR-3B
Table
3.1(b) – Outward Taxable Supplies (Zero Rated)
This table
covers:
- exports,
- SEZ zero-rated supplies.
B.
Where to Report Supplies NOT Approved for Authorized Operations
If:
- supplied goods/services are not
included in approved annexure,
- DPF/DSPF approval absent,
- endorsement unavailable,
- supply not linked to authorized
operations,
then:
zero-rated
benefit may not be available.
In such
cases, although recipient is an SEZ unit, the supply should generally be
treated as a normal taxable inter-state supply.
Reporting
in GSTR-1
Table
4 – Taxable B2B Supplies
Reason:
- transaction loses zero-rated
status,
- but remains taxable inter-state B2B
supply.
Reporting in GSTR-3B
Table 3.1(a) – Outward Taxable Supplies (Other than zero rated, nil rated and exempted)
Reason:
- normal taxable outward supply,
- IGST payable.
15.
Practical Reporting Summary
|
Situation |
GSTR-1 |
GSTR-3B |
Tax Treatment |
|
Authorized
operations approved |
Table 6B |
Table
3.1(b) |
Zero-rated |
|
Not
approved/not endorsed |
Table 4
(B2B) |
Table
3.1(a) |
Normal
IGST supply |
16.
Post-Supply Documents to be Maintained
A.
For Goods
|
Document |
Purpose |
|
Tax
invoice |
Primary
GST document |
|
E-way bill |
Movement
proof |
|
LR/Transport
proof |
Delivery
evidence |
|
Endorsed
invoice |
SEZ
receipt proof |
|
Gate entry
acknowledgment |
Physical
entry evidence |
|
Approved
DPF |
Authorized
procurement proof |
B.
For Services
|
Document |
Purpose |
|
Invoice |
GST
compliance |
|
DSPF
approval |
Service
authorization |
|
Agreement/work
order |
Nature of
service |
|
Service
completion report |
Delivery
proof |
|
Endorsed
invoice |
SEZ
officer confirmation |
17.
Refund Risk Areas
GST officers
commonly scrutinize:
- mismatch between invoice and
annexure,
- missing endorsement,
- expired LOA,
- invalid LUT,
- absence of DPF/DSPF,
- services not linked to authorized
operations,
- incorrect reporting in GSTR-1 and GSTR-3B.
18.
Important Practical Recommendation for Suppliers
Suppliers
should never rely solely on verbal confirmation from SEZ customers.
Always
obtain:
- LOA,
- approved annexure,
- approved DPF/DSPF,
- specified officer endorsement.
This
protects the supplier during:
- GST audit,
- refund proceedings,
- departmental investigations.
19.
Suggested Internal SOP for SEZ Supplies
Pre-Supply
SOP
Verify:
✔ GSTIN
✔ LOA validity
✔ Annexure approval
✔ DPF/DSPF approval
✔ LUT validity
✔ PO and agreement
Post-Supply
SOP
Collect:
✔ Endorsed
invoices
✔ Delivery proof
✔ E-way bill
✔ Transport documents
✔ Service reports
✔ Refund reconciliation
Conclusion
Supplies to SEZ are legally inter-state supplies and
therefore attract IGST under GST law. However, when supplies are made for
authorized operations and proper documentation is maintained, the transaction
qualifies as a zero-rated supply.
The most
important practical takeaway is:
Suppliers
should additionally verify:
- approved annexures,
- DPF/DSPF approvals,
- specified officer endorsements.
If the supplied goods or services are not included in the
approved authorized operations list, zero-rated benefit may not be available.
In such cases:
- supplier should generally charge
IGST,
- report the transaction in GSTR-1
Table 4,
- report it in GSTR-3B Table 3.1(a)
as a normal taxable supply.
Only supplies genuinely qualifying for authorized operations
and supported by proper documentation should be reported as:
- GSTR-1 Table 6B, and
- GSTR-3B Table 3.1(b).
In SEZ transactions, documentation is the foundation of GST
compliance. Proper verification before supply and proper endorsement after
supply are essential to safeguard zero-rating benefits and avoid future
litigation.
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