The Hon’ble Finance Minister in her 2022 Budget Speech proposed to revamp the laws relating to Special Economic Zones (SEZ). The industry at large is expecting a flexible and liberal regulatory framework that would render the SEZ scheme, lot more attractive and business friendly. Through this article, the authors intend to highlight a fundamental inconsistency which continues to persist between the GST and SEZ laws and how the proposed reform presents a unique opportunity for the Government to ensure course correction. Clearance of goods from SEZ to DTA A GST perspective Under GST, as a general rule, the liability to pay tax on any supply is on the supplier of goods and/or service. Only in certain specific instances, the recipient is made liable to pay tax under reverse charge mechanism (RCM) , through notification.  Supply of goods from SEZ to Domestic Tariff Area (DTA) has been treated as an inter-state supply ; however, the transaction has not been made liable to tax under RCM in the hands of the DTA unit. Thus, on a vanilla reading of the GST law, it is the supplier (SEZ Unit) who is liable to pay IGST under forward charge for any supply made to a DTA Unit.  Having said that, Section 53 of the Special Economic Zones Act, 2005 (“SEZ Act”) deems an SEZ to be a territory outside the customs territory of India for the purpose of undertaking the authorized operations. Thus, through a deeming fiction, SEZ has been treated as an area which is beyond the customs jurisdiction.  A Customs perspective The term ‘import of goods’ has been defined in Section 2(23) of the Customs Act, 1962 to mean bringing goods into India from a place outside India. In case of supply of goods by way of imports, proviso to Section 5(1) of the IGST Act states that IGST shall be levied and collected as per Section 3 of the Customs Tariff Act, 1975, i.e., IGST is payable by the importer on clearance. The obvious question that arises for consideration is whether an SEZ (which is deemed to be a territory beyond the Customs frontier) can be said to be a place outside India, thereby satisfying the definition of the term ‘import of goods’ under GST/Customs when goods are cleared from SEZ to DTA. In the authors view, the legal fiction created by the SEZ Act deeming an SEZ to be outside the customs territory of India is limited to undertaking the authorized operations as required under the SEZ Act alone. Therefore, all the other statutes continue to apply to SEZs as if the same is a part of India. Resultantly, any movement of goods from SEZ to DTA will not amount to an ‘import of goods’; either under Customs or GST law. This view has been affirmed by the Hon’ble Gujarat High Court in the case of Adani Power Limited v. UOI wherein the Court observed that removal of goods from an SEZ to DTA will not amount to import of goods. It is noteworthy that the judgment has also been affirmed by the Supreme Court . Thus, basis the above analysis, it is safe to conclude that supply of goods from SEZ to DTA will not amount to import of goods and therefore, IGST will not be payable by the DTA unit as an ‘importer’. An SEZ perspective There is a twist in the tale. Section 30 of the SEZ Act creates an independent levy and provides that when any goods are removed from an SEZ to DTA, the same shall be chargeable to ‘duties of customs’ as leviable on such goods when imported. It is imperative to note that neither Section 30 of the SEZ Act nor any other provision deems clearance of goods from SEZ to DTA as ‘import’. Section 30 merely borrows the customs duty payable on import as a measure for charging duty on clearance from SEZ to DTA. The Taxman and the Taxpayer have been treating IGST payable on import as a duty of customs. Therefore, assuming this hypothesis to be correct, in addition to other custom duties such as BCD and Social Welfare Surcharge, IGST is also payable as a duty of customs on clearance of goods from SEZ to DTA. The Problem This brings us to the core issue of this Article viz. whether on removal of goods from SEZ to DTA, over and above the payment of IGST as a duty of customs under Section 30, is there a mandate on the supplier (SEZ Unit) to pay IGST under forward charge on this supply under the provisions of the GST laws. At this point, it is reiterated that unlike the levy of IGST on import of goods where there is an explicit provision under GST law which states that IGST will be levied and collected under the Customs law, there is no similar provision that IGST on supplies made by SEZ to DTA Unit will be levied and collected as per the SEZ law. Therefore, there exists a theoretical possibility of dual levy of IGST on SEZ to DTA clearances, one, under Section 30 of SEZ Act as a duty of customs which is payable when the Bill of Entry is filed and two, under Section 5 of IGST Act which is payable by the SEZ Unit through a tax invoice under forward charge.  In this regard, the Hon’ble Supreme Court has noted that ‘the general rule of construction is that a taxing statute will not be so construed as to result in taxing the same person twice in respect of the same income or transaction. There is, however, nothing to prohibit the legislature from so enacting it’ . Therefore, it can be reasonably inferred that the intention of the Union Government is not to collect IGST twice on the clearance of goods from an SEZ unit to DTA. This inference can also be drawn from a Circular issued by the Ministry of Finance wherein it has been clarified that in case of goods being supplied while they are deposited in a customs bonded warehouse, IGST shall be levied and collected only once at the time of final clearance of the warehoused goods for home consumption i.e., at the time of filing the ex-bond bill of entry. Further, Section 51 of the SEZ Act states that the provisions of the SEZ Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Consequently, the provisions of the SEZ Act would have an overriding effect over the GST Laws and therefore, IGST which is payable on supply of goods from SEZ to DTA will be in accordance with SEZ Act [Section 30] and the same overrides the IGST Act.  While this argument appears to be attractive and positions itself as a reasonable justification against dual levy, an alternate argument worth considering is that the nature and aspect of IGST levies contemplated under the IGST Act (on supply of goods by SEZ Unit to DTA Unit) and SEZ Act (on removal of goods from SEZ to DTA) are entirely different.  To better understand this position, let us consider a transaction involving removal of free samples from an SEZ to DTA unit. This transaction does not qualify as a taxable supply under GST and therefore, tax is not liable to be paid under the GST Act. Nevertheless, due to the operation of Section 30 of the SEZ Act, when the free samples are ‘removed’ from the SEZ unit, IGST would have to be remitted. This illustration reflects the different aspects on which the levy under GST and SEZ Laws are attracted.  A possible counter to the overriding effect created by Section 51 isthat only if there is a conflict will the overriding provision come into play. In the absence of a conflict, a non-obstante clause will have no application . Resultantly, a view can be taken that since the aspect of levies contemplated under GST and SEZ laws are different, the non-obstante clause under Section 51 will not be applicable to the present case and both levies of IGST can continue to exist independently Conclusion Thus, it is evident that the SEZ Act and the GST Laws are not in alignment which gives scope for Authorities to demand payment of IGST twice on a single supply by SEZ to DTA, once under the IGST Act and second, under the SEZ Act. While it may not be the intention of the Legislature to apply a dual levy on the transaction of removing goods from the SEZ to DTA, as the law stands on date, there is scope for such an interpretation. To mitigate avoidable litigations and clear the air on the subject, trade may make suitable representations to the Government seeking clarity on the issue. An explanation on the correct legal position through a suitable circular is much warranted. Considering that the SEZ Laws are in the process of being revamped, the time is ripe to address the incongruity between these two laws. Afterall, change is a door to opportunity. 

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