For indirect tax, a GIFT IFSC unit is not a special species. It is an SEZ unit, and the GST treatment of GIFT IFSC units follows from that classification, read with two questions: whether a supply is for its authorised operations and whether a supply it makes qualifies as an export of services.

Neither question is answered by the unit’s IFSCA registration. Both are answered by the GST statutes and the scope of the unit’s SEZ approval.

The Starting Point: SEZ Supplies are Inter-State

Section 7(5) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) provides that supplies of goods or services “to or by a Special Economic Zone developer or a Special Economic Zone unit” are treated as supplies in the course of inter-State trade or commerce. The consequence is structural: IGST, not CGST and SGST, is the relevant levy on both sides of a transaction involving a GIFT IFSC unit.

This is distinct from the customs fiction in section 53(1) of the SEZ Act, 2005, which deems an SEZ to be a territory outside the customs territory of India “for the purposes of undertaking the authorised operations”. That fiction governs customs treatment; it does not take the SEZ outside the GST net.

Inbound Supplies: Zero-Rated, but only for Authorised Operations

Section 16(1) of the IGST Act defines “zero rated supply” as:

• the export of goods or services or both; or
• the supply of goods or services or both for authorised operations to an SEZ developer or unit.

The words “for authorised operations” were inserted by the Finance Act, 2021 and brought into force on 1 October 2023. Before that, the sub-clause referred simply to supplies to an SEZ developer or unit. The change narrowed the relief and made the scope of the recipient’s authorised operations directly relevant to its Indian suppliers’ tax position.

For an Indian supplier to a GIFT IFSC unit, two routes remain under section 16(3): supply under bond or letter of undertaking without paying integrated tax and claim a refund of unutilised input tax credit; or, for classes of persons or supplies notified under section 16(4), supply on payment of integrated tax and claim a refund of the tax paid.

Section 16(2) preserves input tax credit on zero-rated supplies even where the supply is otherwise exempt, subject to the blocked-credit provision in section 17(5) of the CGST Act. Section 16(5), inserted by section 153 of the Finance (No. 2) Act, 2024 with effect from 1 November 2024, denies refund of unutilised credit or of integrated tax where the goods are subjected to export duty.

A proviso to section 16(3) requires a supplier to deposit the refund, with interest, within thirty days of the expiry of the period allowed under the Foreign Exchange Management Act, 1999 for realisation of sale proceeds, where those proceeds are not realised.

Imported Services: A Specific Exemption

Where a GIFT IFSC unit procures services from outside India, the default position would be a reverse-charge liability. Notification No. 18/2017-Integrated Tax (Rate) dated 5 July 2017 exempts “services imported by a unit or a developer in the Special Economic Zone for authorised operations” from the whole of the integrated tax.

The exemption is again tethered to authorised operations. A unit that imports services which fall outside the operations authorised in its Letter of Approval cannot rely on it.

Outbound Supplies: When is a Service an Export?

Most GIFT IFSC units supply services to clients outside India. That supply is zero-rated as an export only if it satisfies the five conditions in section 2(6) of the IGST Act:

1. the supplier of service is located in India;
2. the recipient is located outside India;
3. the place of supply is outside India;
4. payment has been received in convertible foreign exchange, or in Indian rupees wherever permitted by the RBI; and
5. the supplier and recipient are not merely establishments of a distinct person under Explanation 1 to section 8.

Two of these deserve particular attention in an IFSC context.

Condition (i) confirms that the unit is “located in India”. Despite the customs fiction and the FEMA non-resident deeming (Article 2), an IFSC unit supplying services is an Indian supplier for GST. Its supplies to offshore clients are exports; they are not outside the GST framework.

Condition (v) is the intra-group trap. A GIFT IFSC unit that is a branch or establishment of the same legal person as its overseas client, for example an offshore parent’s IFSC branch serving that parent, may fail this condition, because the two may be establishments of a distinct person. The distinction between a subsidiary and a branch, and between a client and a head office, therefore has a direct GST consequence for global in-house centres and back-office operations.

Intermediary services after the Finance Act, 2026. Condition (iii), that the place of supply be outside India, was for years fatal to intermediaries. Section 13(8)(b) of the IGST Act fixed the place of supply of intermediary services at the location of the supplier, so a broker, distributor or referral agent in India acting for a foreign principal could not export. Section 157 of the Finance Act, 2026 omitted clause (b) with effect from 30 March 2026, the date of assent. Place of supply for intermediary services now follows the default rule in section 13(2), the location of the recipient. An IFSC unit arranging or facilitating supplies for a principal outside India should therefore test such supplies afresh as exports of services, subject to all five conditions in section 2(6). Supplies made before 30 March 2026 remain governed by the omitted clause. Whether the omission affects pending disputes for earlier periods is a separate question that should be examined on the facts.

On condition (iv), CBIC Circular No. 202/14/2023-GST dated 27 October 2023 clarified that receipt of payment in Indian rupees through Special Rupee Vostro Accounts, as permitted by the RBI’s A.P. (DIR Series) Circular No. 10 of 11 July 2022, satisfies the requirement.

Supplies into the Domestic Tariff Area

For GIFT IFSC units contemplating domestic-facing revenue lines, the GST treatment of supplies to the domestic tariff area interacts with two other constraints: the IFSCA regulations governing whether the activity may be carried on with Indian residents at all, and the income-tax requirement that the section 147 deduction attaches to approved business activities (Article 5).

Registration and Documentation

A GIFT IFSC unit requires its own GST registration. IFSCA’s published workflow for setting up a unit routes the GST registration application through the SWIT portal alongside the other post-approval steps (Article 3).

Three documentation habits reduce disputes:

• Map the authorised operations. The list of services and goods approved for the unit’s authorised operations determines the zero-rating of inbound supplies and the import-services exemption. Where a new activity is added, the approval should be updated before the procurement, not afterwards.
• Preserve the export evidence. Foreign exchange realisation, the location of the recipient and the place of supply analysis should be documented contemporaneously for each service line.
• Test the distinct-person question at contract stage. Whether the counterparty is a separate legal person, and whether the arrangement is with a head office or with a genuinely separate entity, decides condition (v) and cannot be fixed by invoicing practice afterwards.

The Position as at 17 September 2026

The statutory framework described above is in force. The narrowing of section 16(1)(b) to authorised operations has applied since 1 October 2023, and section 16(5) since 1 November 2024. Specific questions, such as the GST treatment of particular financial services or the place of supply for a given product, turn on the CGST and IGST place-of-supply provisions and on the relevant rate and exemption notifications, which should be checked for the period concerned.

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