SEZ unit entitled to refund of unutilised ITC distributed through Input Service Distributor against its own zero-rated exports; recipient-supplier distinction under Rule 89(1) does not bar the claim: GSTAT Visakhapatnam

The Tribunal held that the appellant's claim is for refund of ITC validly distributed through the ISD mechanism and accumulated against its own zero-rated exports, not merely because it is a recipient of supplies to an SEZ unit.

The GSTAT Visakhapatnam Bench has taken up for consideration appeals filed by a Special Economic Zone unit engaged in export of ferro alloys, challenging the rejection of refund claims for unutilised input tax credit distributed through an Input Service Distributor for the periods April to June 2022 [Maithan Alloys v. Deputy Commissioner, Waltair Ward, Visakhapatnam].

The Division Bench of Bhaskar Reddy Vemireddy (Judicial Member) and Satish Agrawal (Technical Member) noted that the adjudicating authority rejected the claims on the ground that the entitlement to refund in respect of supplies to an SEZ unit vested in the supplier, not the recipient. The appellant contended that this reasoning conflated two distinct situations: it was not claiming refund as a recipient of inward supplies to the SEZ, but for ITC validly distributed via the ISD mechanism and accumulated against its own zero-rated exports made without payment of IGST under Section 16 of the IGST Act.

The case raises the important question of whether the second proviso to Rule 89(1), which contemplates refund applications by the supplier in respect of supplies to an SEZ unit, operates as an absolute prohibition against an SEZ unit claiming refund of ISD-distributed ITC accumulated against its own export turnover under Rule 89(4).

2026-juristway.com-2978-GSTAT(Visakhapatnam)-GST  |  GSTAT, Visakhapatnam  |  APL/1/VSK/2026  |  14.10.2026