Dear Sir, One of our client is setting up unit in SEZ. He is procuring office furniture and interior items like partitions, lights etc for admin block. Will this purchase will be considered for authorised operation and will be GST free?

Reply—As per section 16(1) of the IGST Act, “Zero rated supplies” means supplies of goods or services or both to a SEZ developer or a SEZ unit. 

The operations to be carried out in the Special Economic Zone and also in the Units located therein have to be in accordance with the authorisation to be given by the Central Government, in terms of Section 4(2) of the SEZ Act, 2005. Further Section 15(9) of the said Act further requires that the SEZ Unit shall carry out only the Authorised operations in the Unit. These provisions are incorporated in the definition of 'Authorised operations'under Section 2(c) of the SEZ Act, 2005.

The definition of the Authorised operations and the provisions of Section 4(2) and Section 15(9) clearly establish that the Units operating in the SEZ are required to undertake well defined activities. Such activities are termed as Authorised operations. The Act also provides that the proper officer shall certify the authorised activities. It thus flows that any special benefit accruing to the Units located in the SEZ shall be strictly in respect of the Authorised operations only.

The supply of furniture and interior items will qualify as zero rated supply, as defined under Section 16 of the IGST Act' 2017. Therefore it will be tax free.