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According to the general rule import onto designated zone from a place outside the state is not import. However, Article 51 of the executive regulation specifically covers the instances for tax on designated zones.

This article covers:

  • Taxability on the transfer of goods between designated zones
  • Conditions for movement
  • Taxability on the transfer of goods within designated zones
  • Tax on the supply of water or any form of energy in designated zones

Is VAT payable on the transfer of goods from one designated zone to another?

General rule: Transfer of goods between designated zones will not be subject to tax

Exception: Transfer of goods between designated zones will be subject to tax if the goods or part thereof is:

  • Altered
  • Released
  • Change in the way used

During the transfer between designated zones

And

The transfer is not in accordance with the rules of customs

Condition for movement:

While moving goods between the designated zones, the owner of the goods to provide the financial guarantee for the payment of tax.

The tax will become payable if the conditions for movement are not met (as specified in exception above)

Is VAT payable on the transfer of goods within a designated zone?

VAT payable on the transfer of goods within a designated zone depends upon the usage of the supply of goods.

If the supply of goods to a person is used by him or a third person as an end consumer – then the place of supply shall be the state.

However, if the supply of goods is used to

  • incorporate into,
  • attached to or
  • otherwise, form part of
  • or are used in the production
  • or sale

Of another good in the designated zone, the supply of such goods will not be subject to VAT.

Tax on the supply  of water or any form of energy in designated zones

The Place of supply of water or any form of energy shall be considered to be inside the State if the place of supply is in a Designated Zone.

Excerpt from draft executive regulation

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The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn't constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn't accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information's provided herein above.

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