SEZ Supplies: The Endorsement the Refund Depends On

SEZ Supplies explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

An exporter of goods has a shipping bill. A supplier to an SEZ has nothing equivalent — the goods never leave India, and the only proof that they reached the zone for the right purpose comes from someone else.

Section 16(1)(b) of the IGST Act zero-rates a supply to an SEZ developer or SEZ unit for authorised operations. Rule 89(2)(c) requires, for goods, a statement of invoices with evidence regarding the endorsement specified in the second proviso to Rule 89(1) — that the goods were admitted in full into the SEZ for authorised operations, endorsed by the specified officer of the Zone. Rule 89(2)(d) requires, for services, the endorsement plus details of payment along with proof. Rule 89(2)(e) requires a declaration that the SEZ unit or developer has not availed input tax credit of the tax paid by the supplier.

The three things the supplier needs from someone else

1. The specified officer's endorsement. That the goods were admitted in full into the SEZ for authorised operations, or that the services were received for authorised operations.

2. Proof of payment — for services, evidence that the SEZ recipient paid the supplier.

3. The declaration that no credit was availed — from the SEZ unit or developer.

None of these is within the supplier's control, and a refund cannot be filed without them.

"For authorised operations" is a condition

The words were inserted into s.16(1)(b) by the Finance Act, 2021, and they are operative, not descriptive.

A supply to an SEZ unit that is not for its authorised operations is an ordinary taxable supply — CGST plus SGST or IGST as the case may be, with no zero-rating and no refund.

The letter of approval issued to the SEZ unit lists its authorised operations. A supply outside that list does not qualify, and the specified officer will not endorse it — which is precisely how the mischaracterisation is discovered, usually after the supply has been made at zero rate.

Practical consequence: obtain a copy of the recipient's letter of approval and confirm the supply falls within it before treating it as zero-rated.

The declaration that no credit was availed

Rule 89(2)(e) requires it because both parties could otherwise benefit from the same tax.

Where the supplier charged IGST and claims a refund of it, the SEZ unit must not also take credit of that IGST. Where the SEZ unit did take credit, the supplier's refund fails.

Two routes are therefore possible on an SEZ supply, and they are mutually exclusive:

Supplier supplies under a LUT without payment, claims refund of unutilised credit under Rule 89(4). Nothing for the SEZ unit to credit.

Supplier supplies with payment of IGST, claims refund of the tax paid. The SEZ unit must not claim credit and must declare so.

The second route requires the declaration; the first does not, on its own terms — but the endorsement is required either way.

The two-year clock

Explanation to s.54 has no SEZ-specific limb. For a supplier claiming refund of unutilised credit, clause (e) applies — the due date of the s.39 return for the period in which the claim arises. For a claim of IGST paid, clause (h) — the date of payment of tax.

The endorsement, however, comes when the zone officer issues it — which may be months later. A supplier that waits for the endorsement before starting the claim is consuming its own limitation period.

Practical approach: pursue the endorsement as part of the delivery process, not as a refund step. The relevant date →

What the SEZ unit itself claims

An SEZ unit is not ordinarily a refund claimant on inward supplies, because those supplies are zero-rated at the supplier's end and the unit pays no tax on them.

Where the unit did pay tax — because the supplier charged it, or because the supply was not for authorised operations — the position is that the unit either takes credit (if eligible) or, in the specified cases, applies for refund itself. The third proviso to Rule 89(1) contemplates the recipient applying in specified circumstances.

The unit's own exports out of India are dealt with under the SEZ Act and customs framework, not through the GST refund route.

Practical notes

• Register the SEZ unit separately. A shared GSTIN with a domestic unit makes the zero-rating unverifiable. SEZ separate registration →
• Obtain the letter of approval and check the supply against the authorised operations before invoicing at zero rate.
• Build the endorsement into the delivery documentation — the invoice going into the zone with the endorsement coming back.
• Get the no-credit declaration at the same time, not at refund stage.
• Use the correct invoice endorsement — the Rule 46 proviso wording, matched to the route used. Export and SEZ invoice endorsements →
• Track the limitation from the relevant date, not from the endorsement date.

Key takeaways

• s.16(1)(b) IGST zero-rates SEZ supplies for authorised operations — a condition, not a description.
• Rule 89(2)(c) and (d) require the specified officer's endorsement, and for services, proof of payment.
• Rule 89(2)(e) requires the SEZ entity's declaration that no credit was availed.
• The letter of approval determines what counts as authorised operations.
• The LUT route and the with-payment route are mutually exclusive on the credit question.
• Pursue the endorsement as part of delivery, because limitation runs from the relevant date, not the endorsement.

Read next

• SEZ Units and Developers: Why Registration Must Be Separate
• GST Refund for SEZ Units and Developers
• Rule 89(1) and (2): Who Applies, and With What Evidence
• Export and SEZ Invoice Endorsements

Disclaimer: Positions stated as on 5 September 2026, based on the CGST and IGST Acts and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Refunds under GST (January 2026).