This circular provides clarifications on certain issues under GST relating to supplies made to Special Economic Zone (SEZ) developers or units and refund of unutilised input tax credit (ITC) in the case of job workers in the textile sector.

The circular clarifies that services such as short-term accommodation, conferencing, banqueting and similar services provided to a SEZ developer or a SEZ unit shall be treated as inter-State supplies, irrespective of the location of the supplier or the place where the immovable property is situated. This is because supplies made to SEZ developers or units are specifically covered as inter-State supplies under section 7(5)(b) of the IGST Act, which prevails over general place of supply provisions.

It further clarifies that the benefit of zero-rated supply is available only when goods or services are supplied to a SEZ developer or SEZ unit for authorised operations. Accordingly, services such as event management, hotel or accommodation services, and consumables will qualify as zero-rated supplies, subject to restrictions under section 17(5) of the CGST Act, provided the receipt of such supplies for authorised operations is duly endorsed by the specified officer of the SEZ.

The circular also clarifies that independent fabric processors (job workers) in the textile sector are eligible for refund of unutilised ITC on account of inverted duty structure under section 54(3) of the CGST Act. This benefit is available even if the fabrics supplied to them are covered under Notification No. 5/2017–Central Tax (Rate), as their output supply is job work service and not supply of goods.