Your Client Is an SEZ Unit Down the Road. Your Invoice Is Still Inter-State.

You're in Ahmedabad. Your new client is a software company in an IT SEZ in Gandhinagar, twenty-five minutes away. Same state, Indian company, rupee payment. So you raise the invoice the way you raise every Gujarat invoice: ₹80,000 plus 9% CGST and 9% SGST, ₹94,400 total.

A week later their accounts team sends it back. "We're an SEZ unit. Please reissue under LUT, without tax, with the SEZ endorsement."

That invoice was wrong in three ways, and none of them are obvious if you've only ever billed domestic clients or foreign ones. An SEZ client sits in between: it's an Indian company that GST treats almost like a foreign one.

Short answer: a supply to an SEZ unit is always inter-state, so it's IGST, never CGST and SGST, even inside your own state. It's also a zero-rated supply, so with an LUT on file you charge no tax at all and print a specific endorsement line. And it goes in a different part of GSTR-1.

Why "same state" doesn't matter here

Normally, place of supply decides the tax head. Client in your state, CGST and SGST. Client in another state, IGST.

SEZs are carved out of that. Section 7(5)(b) of the IGST Act says a supply of goods or services to or by an SEZ developer or SEZ unit is a supply in the course of inter-state trade. Full stop. It doesn't matter that the SEZ is in your city.

So even if you decide to charge tax, the invoice above should have said 18% IGST, not 9% + 9%.

Why most SEZ clients expect no tax at all

Section 16 of the IGST Act lists two kinds of zero-rated supply: exports, and supplies to an SEZ unit or developer for their authorised operations.

Zero-rated means the supply is taxable, but at an effective rate of zero, and you keep the right to claim credit on your inputs. In practice that works exactly like a foreign export:

• You file a Letter of Undertaking (LUT) on the GST portal in Form RFD-11, once per financial year.
• With the LUT on file, you invoice the SEZ unit without charging IGST.
• The invoice carries a fixed endorsement line (below).

If you already bill foreign clients, you probably have an LUT for FY 2026-27 already. The same LUT covers SEZ supplies. You don't need a second one.

If you've only ever billed Indian clients, you probably don't have one. Filing an LUT takes about fifteen minutes, costs nothing and is effective as soon as the ARN is generated. It applies from the date you file, not backwards, so file it before you raise the SEZ invoice.

What if you charge IGST instead?

You can. The invoice then carries the "on payment of integrated tax" version of the endorsement. But your client can't treat that 18% the way a normal domestic client would, and since October 2023 the route for refunding IGST paid on zero-rated supplies has been narrowed. The practical result: an SEZ client will almost always ask for the LUT version, and it's the cleaner one for you too.

The endorsement line, word for word

Rule 46 of the CGST Rules prescribes the wording. For the LUT route:

SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX

For the tax-paid route:

SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS ON PAYMENT OF INTEGRATED TAX

Many invoices drop the "EXPORT/" half and keep only the SEZ wording, since the supply isn't an export. Either way, put your LUT ARN and its date next to it.

The corrected invoice

Here's the same job, done right:

Everything else on a valid GST invoice still applies: your GSTIN, a unique invoice number, date, your SAC code, and the amount in words.

Payment in rupees is normal for SEZ work. Unlike a foreign export, the definition of an SEZ supply doesn't depend on foreign currency coming in.

"For authorised operations" is doing real work

Since 1 October 2023, zero-rating applies only to supplies made for the SEZ unit's authorised operations. Those are the activities the SEZ's Development Commissioner has approved for that unit, set out in its Letter of Approval (LOA), plus a default list of common services.

Most freelance work for an IT or services unit — development, design, content, consulting on the unit's own business — will usually fall inside. But you don't decide that, and neither does the GST officer. The unit's approval does.

So before your first invoice, ask the client for two things:

1. 1.Confirmation that they're an SEZ unit or developer, with the SEZ's name.
2. 2.Confirmation that your service is covered by their authorised operations (the LOA, or their procurement approval on SEZ Online).

A two-line email is enough, and it's the document you'll want if anyone asks later.

A recent footnote: in March 2026 the Bombay High Court held that the "authorised operations" condition can't be applied to supplies made before 1 October 2023. That matters for old disputes, not for invoices you raise today, which are squarely under the new wording.

The SEZ officer's endorsement

This is the part that surprises people. For zero-rated supplies of services to an SEZ, the rules expect the SEZ's specified officer to endorse that your services were received for authorised operations.

You don't apply for this. Your client does, usually through the SEZ Online system, after you've delivered and invoiced. You'll need it, along with proof that the client paid you, if you ever claim a GST refund on your inputs. Most solo freelancers have little input credit and never file a refund, so it rarely bites. But SEZ rules treat the endorsement as proof of the supply itself, and it's much easier to get while the project is fresh than two years later. Ask for a copy when you send the invoice.

Where it goes in GSTR-1

Not in the normal B2B list. In GSTR-1, supplies to SEZ units are reported separately (Table 6B). On the portal they sit in the same tile as your B2B invoices, but you pick the invoice type "SEZ supplies without payment" (or "with payment", if you charged IGST).

Get this wrong and your client's records won't line up with yours, and the zero-rated supply shows up as a domestic one. If you've already filed it under plain B2B, the fix is an amendment in a later GSTR-1, and the window for FY 2025-26 corrections closes on 30 November 2026.

Already sent the wrong invoice?

It depends on how far it's gone.

Not yet reported in GSTR-1. Cancel it and reissue a correct invoice. If the client hasn't accounted for it, this is the cleanest route. The general mechanics are in our guide to fixing an invoice you've already sent.

Already filed, with CGST + SGST paid. You paid tax under the wrong head. GST has a specific fix for this: Section 77 of the CGST Act and Section 19 of the IGST Act. In short, you pay the correct IGST, then claim a refund of the CGST and SGST, with no interest charged on the IGST you pay late. If you had an LUT on file and the client wants a zero-rated invoice instead, you'll issue a credit note for the tax portion and a corrected document. This is the point to bring in your CA; the right sequence depends on your filing and your client's.

No LUT on file at the time. You can't zero-rate an invoice raised before the LUT existed. For that invoice, IGST applies. File the LUT now so everything from here on is covered.

GIFT City clients

If you're in Gujarat, there's a good chance your SEZ client is in GIFT City. Units in the GIFT IFSC sit inside a multi-services SEZ, so the same rules apply: IGST head, zero-rated under LUT, SEZ endorsement, Table 6B. Ask for the same two confirmations.

The one-year clock (ask your CA)

An LUT comes with conditions. For foreign exports of services, payment has to arrive within a year or the IGST you didn't charge falls due with interest. Rule 96A says those LUT conditions apply to SEZ supplies too, with the necessary changes. How exactly that plays out for a rupee payment from an SEZ unit is a question for your CA, not a blog post. The practical takeaway is the same either way: don't let an SEZ invoice sit unpaid for months without chasing it.

Checklist for your first SEZ invoice

• Confirm the client is an SEZ unit or developer, and that your service is covered by their authorised operations.
• Make sure your LUT for FY 2026-27 is filed. If not, file it first.
• Set the tax head to IGST, at 0% under LUT.
• Print the Rule 46 endorsement with your LUT ARN and date.
• Report it in GSTR-1 as "SEZ supplies without payment", not plain B2B.
• Ask the client for the SEZ officer's endorsement once they've received your work.
• Chase payment like it's an export.

Mavoin keeps the rest of your book correct around invoices like this: CGST/SGST or IGST from place of supply on domestic work, zero-rated foreign invoices under your LUT with the endorsement on the PDF, and the FX rate captured on the invoice date. One tool for India and the world, priced for one person.

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Simple invoices for people who run businesses, not books.

Mavoin is not a Chartered Accountant service. Verify GST specifics with your CA.