Madras High Court Allows SEZ Units to Claim GST Refunds

In a recent and impactful judgment, the Madras High Court granted relief to businesses operating in Special Economic Zones (SEZs). The court clarified that SEZ units are entitled to claim GST refunds on zero-rated supplies — but only when the supplier has not claimed the refund on the same transaction.

This decision offers much-needed clarity on a grey area under GST law and brings relief to many SEZ-based businesses facing refund denials.

What Was the Issue?

SEZ units regularly purchase goods and services from suppliers located in the Domestic Tariff Area (DTA). As per GST law, these supplies are treated as zero-rated, which means no GST should be applied. But in practice, suppliers sometimes charge GST mistakenly, and SEZ units end up paying it.

The law generally states that in zero-rated supply cases, the supplier is supposed to claim a refund of the GST paid. But the problem arises when the supplier does not file for a refund.

So, the question is:

Can the SEZ unit claim a refund if the supplier doesn’t?

This was exactly the situation in the case of Urjita Electronics.

Case Background: Urjita Electronics

Urjita Electronics, an SEZ unit, had paid GST to its suppliers on goods/services supplied to it — which should have been tax-free under the zero-rated supply rule.

When Urjita applied for a GST refund, the department rejected the claim, stating that only the supplier can claim the refund under the law.

As a result, Urjita filed a writ petition in the Madras High Court seeking relief.

What Did the Court Decide?

The Madras High Court ruled in favor of Urjita Electronics, stating that:

SEZ units can claim a refund of GST, but only if the supplier has not claimed it.

The SEZ unit must obtain a written disclaimer (confirmation) from the supplier that:

The supplier has not claimed and will not claim a refund for the same transaction.

There is no restriction in the law that only the supplier can claim the refund — SEZ units can also do so if they paid the tax.

The earlier refund rejection order was set aside (cancelled).

The case was sent back to the GST officer for reconsideration, and a fresh refund order must be passed after review — with interest on the amount.

What This Means for SEZ Units

This ruling is very important for SEZ businesses, and here's why:

You can claim a refund

If your SEZ unit accidentally paid GST on a zero-rated supply, you can get that money back — as long as the supplier has not already claimed the same refund.

Supplier's Confirmation is a Must

You will need a disclaimer letter from your supplier confirming that:

They did not and will not claim a refund on that supply.

Keep All Documents Ready

Maintain complete records of the transaction.

Attach the supplier’s disclaimer with your refund application.

Ensure proper filing through GST portal procedures.