How do you supply services to an SEZ unit without charging GST?

Plenty of Indian service providers bill clients who sit inside a Special Economic Zone (SEZ): IT and back-office companies in SEZ campuses hire designers, trainers, recruiters, consultants, auditors and software subcontractors from outside the zone. Under GST, these supplies can be zero-rated, much like exports, but the rules and paperwork are different.¹²

This guide is written for the supplier outside the zone, in what the SEZ law calls the Domestic Tariff Area (DTA). For how money flows into and out of SEZ units, see SEZ export payment rules. The position is stated as of 28 October 2026.¹³

What is a zero-rated supply of services to an SEZ unit?

A zero-rated supply of services to an SEZ unit is a supply for the unit's authorised operations, which section 16(1)(b) of the Integrated Goods and Services Tax (IGST) Act treats as zero-rated.¹ The section covers a "supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit".¹

• Condition added: the words "for authorised operations" were inserted by the Finance Act, 2021 and brought into force from 1 October 2023.¹
• Definitions: the terms SEZ, SEZ unit and SEZ developer take their meaning from the Special Economic Zones Act, 2005 (the SEZ Act), under section 2(19) and 2(20) of the IGST Act.⁵
• Authorised operations: the operations that may be authorised for a developer under section 4(2) of the SEZ Act or for a unit under section 15(9), as defined in section 2(c).³ In practice, the unit's approval documents list what it is allowed to do in the zone.

For example, software development subcontracted by an IT services unit, payroll processing for a back-office unit, or design work for an electronics unit's products typically fit. A team dinner organised for staff, or a service for the parent company's operations outside the zone, may not.

Who can supply services to an SEZ unit without charging GST?

A registered supplier outside the zone can supply services to an SEZ unit without charging GST when the service is for the unit's authorised operations, usually under a Letter of Undertaking (LUT).¹⁷

How do you invoice an SEZ unit without IGST?

You invoice an SEZ unit without IGST by furnishing an LUT, endorsing the invoice under rule 46 and keeping the evidence for any refund.²⁷⁸

1. File the LUT in FORM GST RFD-11 for the financial year, if you have not already. See how to file an LUT.⁷
2. Collect SEZ details: the unit's legal name, GSTIN, address in the zone, and confirmation of authorised operations.
3. Endorse the invoice. Rule 46 requires the endorsement "SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX".²
4. Report the supply as a zero-rated supply to an SEZ in your GST return.
5. Get the specified officer's endorsement and payment proof you will need for any refund, as described below.⁸

See the export invoice format for the other invoice fields.

What documents and deadlines apply to supplies of services to an SEZ unit?

The documents for supplies of services to an SEZ unit are the LUT, the endorsed invoice and the rule 89 refund evidence, and the deadline is the rule 96A payment period.²⁷⁸

Although the currency of payment does not matter, actual payment by the SEZ recipient does matter for the refund.¹⁸ See refund of ITC on zero-rated supplies.

What happens if the SEZ unit does not pay or the endorsement is refused?

If the specified officer does not endorse receipt for authorised operations, the refund evidence required by rule 89 is missing, and the zero-rating itself may be questioned under section 16(1)(b).¹⁸

• No payment: rule 89(2)(e) payment evidence is missing, and rule 96A(1)(b) binds the supplier to pay IGST with interest if payment for services supplied under an LUT is not received within one year of the invoice date, or the period allowed under the Foreign Exchange Management Act (FEMA) including any RBI-permitted extension if that is later (or a further period the Commissioner allows).⁷⁸
• Rule 96A(6): applies that sub-rule to SEZ supplies.⁷
• Rupee payments: how rule 96A(1)(b) applies to a rupee payment from an SEZ unit, since that clause speaks of payment in convertible foreign exchange or in rupees where the RBI permits, is not settled in any CBIC circular we could find.⁷

Treat collection as essential and confirm the position with a chartered accountant if a payment is overdue.

How is a supply to an SEZ unit different from exporting a service abroad?

A supply to an SEZ unit is a different kind of zero-rated supply from an export of services, with a different legal test.¹⁵

The table summarises sections 2(6), 7(5) and 16 of the IGST Act and section 2(m) of the SEZ Act.¹³⁴⁵ Section 2(m)(ii) of the SEZ Act defines export to include "supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer".³

What are the common mistakes with supplies of services to an SEZ unit?

The common mistakes with supplies of services to an SEZ unit are skipping the authorised-operations check and filing a refund without the endorsement and payment proof.¹⁸

• No authorised-operations check: ask the SEZ unit for confirmation that your service is used for its authorised operations before you invoice without tax.¹
• Charging CGST and SGST: section 7(5)(b) makes every SEZ supply inter-State, so if tax applies it is IGST.⁴
• Missing endorsement: the invoice needs the rule 46 wording.²
• Filing a refund too early: collect payment and the specified officer's endorsement before you file under rule 89.⁸
• Composition scheme: composition taxpayers cannot make this supply at all.⁴⁶

Confirm unusual cases with a chartered accountant.