A company in a Special Economic Zone asks you for a design, a website or a month of consulting, and your usual invoice stops making sense. The client has an Indian GSTIN, so it is not a foreign client, yet people keep calling the work an export. Two mistakes are easy to make here: charging 18 percent GST by default, or treating the job as an export and skipping the SEZ conditions. Both can cost you money later. This guide to GST on services to an SEZ unit explains what the supply is, which tax head applies, and what to collect from the client before you invoice.
A supply to an SEZ unit is zero-rated, but it is not an export of services
Services supplied to an SEZ developer or an SEZ unit are zero-rated supplies under Section 16 of the IGST Act. That is a different category from an export of services, because your client is a registered business inside India, not a person abroad. The tax law treats it as an inter-State supply, so the tax head is IGST, never CGST plus SGST. The zero rating is the same in effect, but the conditions differ.
The difference matters for how you describe the invoice and which conditions apply. For a client outside India, the rules on place of supply and foreign exchange decide whether you have an export, as the guide on place of supply for a foreign client explains. For an SEZ client, the question is instead whether the work is for the unit's authorised operations.
You can supply under an LUT or pay IGST and claim it back
Section 16(3) gives you two routes. You can supply under a bond or Letter of Undertaking without charging IGST, and claim a refund of any unutilised input tax credit. Or you can charge and pay IGST, then claim a refund of that IGST. The LUT is filed as Form RFD-11 under Rule 96A and is valid for a financial year, so you renew it every year.
The LUT route keeps tax out of your invoice, so you do not wait on an IGST refund. It refunds only unutilised input tax credit, so it matters most if you have ITC to recover. As an illustration only, suppose you bill ₹1,00,000 and the service attracts 18 percent. Paying IGST means the client is invoiced ₹1,18,000 and you wait for a refund of ₹18,000, while an LUT means the invoice is ₹1,00,000 with no IGST at all.
If you already hold an LUT for foreign clients, the guide on the LUT for freelance exports covers the filing steps, and the refund guide for export services shows how an IGST refund claim works.
Zero rating needs authorised operations and an endorsement
Zero rating applies only when the service is for the SEZ unit's authorised operations. The words "for authorised operations" were added by the Finance Act 2021 and have applied from 1 October 2023. A service the unit buys for something outside its approved activity is not zero-rated, so do not assume every SEZ client qualifies for every job.
For services, a refund claim has to carry evidence of receipt of the services for authorised operations, endorsed by the Specified Officer of the zone. This comes from the second proviso to Rule 89(1) of the CGST Rules. The supplier outside the zone files the refund, and only after the endorsement is in hand. Practitioners report that refunds stall without this endorsement, so ask your client for it early. Steps differ between zones, so confirm them with the client's SEZ office.
Ask the SEZ client for these details before you invoice
Before you raise the first invoice, ask the client for its Letter of Approval, its GSTIN and the steps its SEZ office follows for the endorsement. Get written confirmation that the work is for the unit's authorised operations, because that decides the tax treatment.
Do not treat the Letter of Approval as proof by itself. Put the scope in your contract or quote, put the client's GSTIN on the invoice and state which route you are using, as the guide to GST invoices for freelancers explains for a normal invoice. Rule 46 of the CGST Rules requires supplies to an SEZ to be marked on the invoice; check the current wording on the CBIC site.
Services to an SEZ are not a deemed export
A deemed export is a different thing, and your freelance services will not qualify as one. Section 147 of the CGST Act, which you can read in the CGST Act on the CBIC tax repository, lists only supplies of goods. It does not mention services.
Deemed exports are also not zero-rated by default and are not supplied under an LUT. Tax is paid and a refund can be claimed by the supplier or the recipient. The main notified list is in Notification 48/2017-CT and covers goods for things like advance authorisation, EPCG and EOU supplies. So if a client calls your services to an EOU a deemed export, the label does not carry over to services.
Event management and short-term accommodation follow different rules
Event management and consumables are zero-rated only if they are for authorised operations and endorsed. Short-term accommodation, conferencing and banqueting are inter-State supplies. If your work includes anything like that, treat each line separately and ask your CA how it should be shown.
Registration and invoicing in Rinto
Whether you must register for GST depends on your own turnover. The guide on whether a freelancer must register for GST covers the general position.
Rinto creates GST-ready invoices with automatic IGST, CGST and SGST calculation based on your client's state. For an SEZ client, the supply is always inter-State, so IGST is the head to show on the invoice. Rinto does not file GST returns, claim refunds or give tax advice, and it does not process payments. This post is general information, not tax advice, so check the notification text on the GST portal or with a CA.
Frequently Asked Questions
Is a supply to an SEZ unit an export of services under GST?
No. A supply of services to an SEZ developer or unit is a zero-rated supply under Section 16 of the IGST Act, but it is a separate category from an export of services. Your client is registered in India, so the supply is treated as an inter-State supply and IGST is the tax head. An export of services involves a recipient outside India and payment in foreign exchange. The zero rating is the same in effect, yet the conditions differ, because an SEZ supply needs to be for authorised operations. Describe it correctly on the invoice and do not borrow export wording.
Do I charge GST on services to a company in an SEZ?
You have two choices. You can supply under a bond or LUT without charging IGST, or you can charge IGST and claim a refund of it later. Either way, the supply is inter-State, so the tax head is IGST and never CGST plus SGST. Zero rating applies only when the service is for the unit's authorised operations. Ask your client for its Letter of Approval and GSTIN first, and confirm the endorsement process with its SEZ office. The LUT route keeps tax off your invoice, and the IGST route puts the tax with the government until the refund arrives.
Do I need an LUT to invoice an SEZ unit?
You need an LUT only if you choose the route of supplying without paying IGST. The LUT is Form RFD-11 under Rule 96A, it is valid for the financial year, and you renew it every year. The other route is to charge IGST on the invoice and claim a refund of the IGST paid, which needs no LUT. If you already hold an LUT for foreign clients, check whether it covers this supply. The invoice should state the LUT number when you supply under one.
What is the Specified Officer's endorsement for SEZ invoices?
For services, a refund claim must carry evidence of receipt of the services for authorised operations, endorsed by the Specified Officer of the zone. This comes from the second proviso to Rule 89(1) of the CGST Rules. The supplier files the refund only after the endorsement is in hand. Practitioners report that refunds stall without it. The process differs between zones, so ask your client's SEZ office what it needs from you and check the current steps on the GST portal or with a CA.
Are services to an SEZ or EOU a deemed export?
No. Deemed exports under Section 147 of the CGST Act cover only supplies of goods that the government has notified, and the section does not mention services. A freelancer's services to an SEZ unit are instead zero-rated under Section 16 of the IGST Act, subject to the authorised operations condition. Deemed exports are also not supplied under an LUT, since tax is paid and a refund is claimed afterwards. The main notified list sits in Notification 48/2017-CT. If a client uses the term for your services, the label does not change the treatment.