2023 (1) TMI 1092 - AAAR - GST

Classification of supply - zero-rated supply - supply of renting of immovable property services provided by the SEZ Authority - supply of any other services by the suppliers located in DTA to the SEZ unit - reverse charge mechanism - section 16(1) of the IGST Act, 2017 - HELD THAT - On perusal of the provisions of the zero-rated supply under section 16(1) of the IGST Act, 2017, it is clear 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. It is further mentioned here that this provisions of zero-rated supply will cover even the supply of services which are specified under the reverse charge Notification 10/2017-I.T. (Rate) dated 28.06.2017 as amended by Notification No. 03/2018, (Rate) dated 25.01.2018. This is so because it is the settled proposition of the law that the specific provisions made in the Act will have greater legal force than that of a notification issued under same or any other provisions of the same Act. Hence the provisions laid down under section 16(1) of the IGST Act, 2017 will supersede over the notification issued under section 5(3) of the IGST Act, 2017, which enumerates the services which attract GST under reverse charge basis. It is also pertinent to mention here that the said provision of section 16(1) ibid, merely mentions about the supply of goods or services or both to the SEZ developer or SEZ unit. The said provision does not mention any thing about the type of the supplier. 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. By virtue of deeming provision under section 5 (3) of the IGST Act, 2017, the levy on procurement of services specified in Notification 13/2017 CT (Rate) falls upon the unit in SEZ or SEZ developer - The appellant will not be required to pay any GST under RCM on the impugned supply of renting of immovable property services received SEEPZ SEZ, if appellant furnishes LUT. As regards any other services supplied by the DTA to the SEZ unit or developer, it is stated that the aforesaid principle will also be applicable in such cases. That is all the supply of services procured by SEZ unit from the suppliers located in DTA for carrying out the authorised operation in SEZ will not attract any GST in accordance with the provision of section 16(1) of the IGST Act, 2017, and the Appellant will not be required to pay any GST under RCM on the services received from DTA supplier for carrying out the authorized operation in SEZ, subject to LUT.

Summary

Issues Involved:
1. Applicability of reverse charge mechanism (RCM) on SEZ units for renting of immovable property services.
2. Applicability of RCM on other services procured by SEZ units.
3. Overriding effect of the SEZ Act, 2005 on the CGST and IGST Acts.
4. Applicability of zero-rated supply provisions under Section 16 of the IGST Act, 2017.

Issue-wise Detailed Analysis:

1. Applicability of Reverse Charge Mechanism on Renting of Immovable Property Services:
The Appellant, an SEZ unit, procures rental services from SEEPZ SEZ Authority and other services like Advocate Services and Gate Pass Services. The MAAR initially ruled that the Appellant must discharge tax liability under RCM, citing Notification No. 13/2017 and Notification No. 10/2017. The Appellant argued that supplies to SEZ units are zero-rated under Section 16 of the IGST Act, 2017, and should not attract GST. The Appellate Authority concluded that the impugned supply of renting services to the SEZ unit is zero-rated, and the Appellant is not required to pay GST under RCM if they furnish a LUT or bond.

2. Applicability of RCM on Other Services Procured by SEZ Units:
The Appellant sought clarity on whether they are required to pay GST under RCM on other services procured. The MAAR did not address this due to lack of specific details. The Appellate Authority ruled that all services procured by SEZ units for authorized operations are zero-rated under Section 16(1) of the IGST Act, 2017, and the Appellant is not required to pay GST under RCM for these services, subject to furnishing of LUT or bond.

3. Overriding Effect of the SEZ Act, 2005:
The Appellant argued that the SEZ Act, 2005, which provides for tax-free procurement of goods and services, has an overriding effect on other laws, including taxation laws, as per Section 51 of the SEZ Act. They cited various judgments to support this contention. The Appellate Authority agreed, stating that the provisions of the SEZ Act would prevail over conflicting provisions of the CGST and IGST Acts.

4. Applicability of Zero-rated Supply Provisions:
The Appellant contended that supplies to SEZ units should be considered zero-rated and exempt from GST. The Appellate Authority confirmed that any supply of goods or services to SEZ units for authorized operations is zero-rated under Section 16(1) of the IGST Act, 2017. This applies even to services specified under reverse charge notifications, as the specific provisions of the Act take precedence over notifications.

Conclusion:
The Appellate Authority set aside the MAAR's ruling and held that the Appellant is not required to pay GST under RCM for renting of immovable property services or any other services procured for authorized operations in SEZ, provided they furnish a LUT or bond. The decision reinforces the zero-rated supply provisions under Section 16 of the IGST Act, 2017, and the overriding effect of the SEZ Act, 2005.