The Maharashtra Appellate Authority for Advance Ruling (AAAR) has in its recent ruling in the case of Portescap India Private Limited has ruled that Goods and Service Tax shall not be payable under Reverse Charge Mechanism on procurement of renting of immovable property services from Special Economic Zones (SEZ) / other services from any supplier.
Facts of the Case:
The appellant, Portescap India Private Limited is a private limited company incorporated in India who were inter alia engaged in manufacturing of customised motors in India. As the Appellant was an SEZ Unit, it was engaged in exports of the manufactured goods outside India.
The Appellant procures Rental Services from “Santacruz Electronics Export Processing Zone(SEEPZ) wherein GST was presently being discharged by the Appellant under the Reverse Charge Mechanism.
Issue on which ruling was sought:
- Whether an SEZ unit is required to comply with the reverse charge mechanism as a service recipient for local domestic renting of immovable property services procured by the unit from SEEPZ Special Economic Zone Authority.
- Whether an SEZ unit is required to pay tax under reverse charge mechanism on any other services.
The Appellant contended that in order to implement the Notification No. 10/2017 I.T. (R) dated 28.06.2017, the SEEPZ SEZ, which is also a SEZ developer, has to be construed as a local authority as per the provisions of section 2(69) of the CGST Act 2017. As such, the transaction under consideration, i.e., renting of immovable property, would turn out to be between DTA and a SEZ unit, and hence, they would be in position to avail the benefit of LUT as per the SEZ (Amendment) Rules, 2018, and accordingly, they would not be required to pay any GST on the receipt of impugned services.
Order of AAAR: Ruling
AAAR noted that any supply of goods or services or both made to a SEZ developer or SEZ unit for carrying out the authorised operation in SEZ will be considered as zero-rated supply. That is, the
said supply will not attract any GST whatsoever. Further provisions of zero-rated supply will cover even the supply of services which are specified under reverse charge.
AAAR observed that from the provisions of section 16 (1) and Section 5 (3) of IGST Act it is clear that the intention of the legislature is not to tax the supplies made to a unit in SEZ or a SEZ developer, which has been made zero rated under clause (b) of section 16 (1) of the IGST Act, 2017.
In view of above the bench of D.K. Srinivas, (Member Central Tax) and Rajeev Kumar Mital (Member State Tax) held that that the Appellant were not required to pay GST under RCM on the impugned services of renting of immovable property services received from SEEPZ SEZ for carrying out the authorised operation in SEZ subject to furnishing of LUT or bond as a deemed supplier of such services and that the Appellant were not required to pay GST under RCM on any other services received from the suppliers located in DTA for carrying out the authorised operation in SEZ subject to furnishing of LUT or bond as a deemed supplier of such services.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
