2019 (2) TMI 1151 - HC - GST

Supply of goods and /or services - supply of goods or services or both to or by a Special Economic Zone developer or a Special Economic Zone unit - inter-State trade or commerce - section 7(5) of the Integrated Goods and Services Tax Act, 2017 - validity of levying tax on sales of petroleum crude, motor spirit (commonly known as petrol), high speed diesel, natural gas and aviation turbine fuel to Special Economic Zone units and developers under the Gujarat Value Added Tax Act, 2003 by treating them to be local/intra- State sales within the State of Gujarat. Held that - Issue Rule returnable on 8th February, 2019.

Summary

Issues:
Challenge to the constitutional validity of section 7 read with section 4 of the Gujarat Value Added Tax Act, 2003 regarding the levy of tax on sales of specified goods to Special Economic Zone units and developers.

Analysis:
The petitioners, through their learned advocate, highlighted the provisions of section 7 of the Integrated Goods and Services Tax Act, 2017, emphasizing that supply of goods or services to or by Special Economic Zone developers or units should be treated as inter-State trade or commerce. They argued that taxing sales of certain goods to Special Economic Zones under the Gujarat Value Added Tax Act as local/intra-State sales is impermissible once they are considered inter-State transactions. The court took note of these submissions and scheduled a Rule returnable on 8th February, 2019, considering the challenge to the constitutional validity of the relevant sections. Notice of Rule was directed to be issued to the learned Advocate General for further examination. The case is to be heard along with another Special Civil Application from 2017.

This judgment revolves around the interpretation and application of tax laws concerning the treatment of transactions with Special Economic Zones under different statutes. The crux of the issue lies in determining whether the sales of specified goods to Special Economic Zone units and developers should be considered as local/intra-State transactions under the Gujarat Value Added Tax Act or as inter-State trade under the Integrated Goods and Services Tax Act. The petitioners argue that once a transaction is classified as inter-State trade or commerce, levying tax on it as a local sale is legally untenable. The court has acknowledged the constitutional challenge raised by the petitioners and has initiated the process for further examination by issuing a notice to the Advocate General. This case raises significant questions regarding the concurrent application of tax laws at the State and Central levels concerning transactions with Special Economic Zones, highlighting the need for clarity and consistency in tax treatment to avoid legal ambiguities and potential conflicts.