Blogfree trade warehousing zones in India.
The United States was the first nation to start free trade zones by setting up the special ‘Foreign Trade Zone Act’ in 1934. This act was designed to expedite and motivate international trade and commerce in the world.
In India, the free trade warehousing zones are considered a part of the special economic zone, which encourages numerous trading, warehousing, labeling, and many other activities without complicated customs regulations and trade permissions. Some of the leading logistics and supply chain solutions provider companies such as Onnsynex Ventures Pvt. Ltd has launched many free trade warehousing zones in India.
FTWZ & 5 Registration Requirements Under GST
- Section 22 – Section 22 of the CGST Act, all suppliers are liable to complete registration under this Act, wherein their goods or services are taxable if their profit turnover exceeds 20 lakhs a year.
- Section 25 – Again, section 25 of the second provision, states that a person having a unit as mentioned in the Special Economic Zones Act in 2005, given the status of a SEZ developer needs to apply for a unique registration, that is distinct from his normal place of business outside the SEZ in the same Union Territory.
- Unit – A unit as in the SEZ Act of 2005 signifies a unit formed by a businessman which includes an existing Unit, a Unit in the global financial services center, or an offshore banking unit, established during or after the commencement of the SEZ Act.
- Registration – Only those businesses who have registered as a Unit in the SEZ Act in Free Trade Warehousing Zones need to obtain a different registration in connection to the GST. the companies who have not registered in the FTWZ premises as a Unit, and only received the place for warehousing purposes are not applicable for a separate registration.
- 2(85) – As per the 2(85) section of the CGST Act, a place of business can include a warehouse or godown wherein a taxable party stores his products, goods, or services. In consideration of section 2(85), a company that has taken a rental warehouse in an FTWZ is said to add the place as an ‘additional place of business’.
GST & FTWZ FAQs
Is GST applied to FTWZs?
As free trade warehousing zones are a type of SEZ, any supply of goods or products to and from the FTWZs can exploit the special status of SEZ in the GST. supply of goods or products from the DTA to the warehousing zones will be stated as zero-rated supply under section 16 of the IGST Act formed in 2017. There is an exemption from GST law on purchases and on all service-related activities for FTWZ, which includes transportation, and thus increased productivity via lower reverse logistics.
Is GST registration compulsory for SEZ units?
If any business or company has 2 units in the SEZ locations and the rest of 3 units in the DTA or Domestic Tariff Area, the business is required to form 3 registrations; two for SEZ and one for DTA, as per the GST law.
Explain the role of GST in FTZ
Free trade warehousing zones are formed under SEZ, which means that such areas only carry out trading, storing, and other related activities. It is deemed as a foreign territory within the country’s borders, especially for trade and tariffs. So ideally speaking, GST laws cannot be applicable in FTWZ. under GST law, it is stated that any goods to a special economic zone are to be considered as zero-rated supply, a zero tax rate. You can have two alternatives in SEZ, supply under bond or letter of undertaking, minus payment to IGST and claim ITC or input tax credit.
SEZ units are liable for 100% income tax exemption for all export-related income as per Section 10AA of the Income Tax Act for the first period of 5 years, 50% income tax exemption for all export-related income for the next 5 years, and 50% of the reinvested business profits into the same business for the next 5 years. Thus, only those enterprises who have registered as a Unit in a free trade warehousing zone are required to get a separate registration in the GST, under Indian Law.
You can take advantage of zero-rated supply rules and request for warehousing facilities at OSV FTWZ to be exempted from GST tax and tariff duties. OSV’s FTWZ offers cost-effectiveness by enabling faster regulatory clearances and GST tax exemptions.