02.03.2022- SEZ Unit Making Zero Rated Supplies Is Entitled To Take Refund Of The ITC Lying In Their Electronic Credit Ledger

The Hon’ble High Court of Gujarat vide its order dated 18 February 2022 in the matter of M/s IPCA Laboratories Ltd.  Vs. Commissioner in R/Special Civil Application No. 638 of 2021 held that a SEZ unit making Zero Rated Supplies is entitled to take refund of IGST lying in their Electronic Ledger.

The Petitioner preferred the Writ petition before the Hon’ble High Court seeking directions to the respondents to grant the refund of ITC and IGST lying in its electronic credit ledger and praying for quashing of the impugned order passed by the Joint Commissioner (Appeals)


  • The Writ Applicant is pharmaceutical company and one of the manufacturing facilities of the writ applicant is located in Special Economic Zone (SEZ) at Kandla, Gandhi Dham.
  • Further the writ applicant is engaged in export of goods under the Letter of Undertaking (LUT) and accumulated ITC to the tune of Rs. 21,66,887/- on account of receipt of ITC of Integrated Tax from ISD and GST paid in respect of inward supplies for export of goods.
  • The Writ applicant being the SEZ unit making Zero Rated Supplies has not been able to utilize the same, thus filed a refund application in Form GST RFD- 01A on 3rd April 2019.
  • As soon as after the filing of refund application, a show cause notice in Form GST RFD -08 dated 17th May 2019 was issued to the writ applicant to show cause on: –
  • The writ applicant is a SEZ unit and supply of goods and services to SEZ unit is Zero Rated, hence it is not eligible to refund under Section 54.
  • The refund cannot be processed under any category of refund specified under manual refund processing circulars.
  • SEZ unit is not supposed to pay any tax and thus there would be no question of ITC.
  • Till date no circular, notification/ relevant guidelines have been issued by the board providing guidelines to process GST refund claims of the units situated in Special Economic Zone.
  • Thereafter the aforesaid refund claim of 21,66,867/- was rejected by the Assistant Commissioner dated 27th May 2019 in Form GST RFD – 06.
  • The writ applicant preferred an appeal against the aforesaid order dated 27th May 2019 and that too was dismissed by the Joint Commissioner (Appeals) vide impugned order.


  • The Hon’ble High Court after considering the submissions from the both sides held that the issue is no longer res integra in view of M/s Britannia Industries Limited Vs. Union of India (Special Civil Application No. 15473 of 2019) and M/s Amit Cotton Industries Vs. Principal Commissioner of Customs (Special Civil Application No. 20126 of 2018).
  • In view of the aforesaid decisions the writ applicant is entitled to claim the refund of the IGST lying in the Electronic Credit Ledger as there is no specific supplier who can claim the refund under the provisions of the CGST Act and CGST rules as input tax credit is distributed by the input service provider.

The Hon’ble High Court with the above findings set aside and quashed the impugned order passed by the Joint Commissioner (Appeals) with the directions to the respondents to process the refund claim within three weeks from the date of receipt of the order.

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