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2024 (4) TMI 845 - AAR - GSTSEZ unit - requirement to pay tax under reverse charge mechanism on specified services - N/N. 10/2017-IT(Rate) dated 28.6.2017 as amended from time to time - HELD THAT - Under N/N. 37/2017-CT, a unit in DTA can supply services to a unit in SEZ without payment of IGST subject to furnishing of LUT to the jurisdictional Commissioner. On a similar issue, wherein clarification was sought , as to whether the SEZ unit is liable to pay GST in respect of legal services, sponsorship services etc received by an SEZ unit in IFSC, Gandhinagar, from a unit in DTA, which are chargeable to GST under RCM, Tax Research Unit, CBIC, New Delhi, clarified a unit in SEZ or the SEZ developer can procure such services, where they are required to pay GST under reverse charge, without payment of integrated tax provided the actual recipient, i.e. unit in SEZ or SEZ developer, furnishes a Letter of Undertaking in place of a bond as specified in condition no. (i) in para 1 of notification No. 37/2017-CT. The actual recipient of service is the deemed supplier/registered person for the purpose of fulfilling other conditions in para / of the notification ibid including the manner of furnishing of Letter of Undertaking. There is no denying the fact that the aforementioned clarification was given to a specific SEZ unit and is not a circular. However, we find that there is no bar in borrowing the rationale of the aforementioned clarification. Hence, the applicant, an SEZ unit, can procure the services mentioned supra, for use in authorized operations without payment of IGST provided the applicant, furnishes a LET or bond as specified in condition (i) of para 1 of notification No. 37/2017-CT. The applicant, an SEZ unit, is not required to pay GST under RCM on specified services in accordance with notification No. 10/2017-IT(Rate) dated 28.6.2017 as amended from time to time, subject to furnishing a LUT or bond as specified in condition (i) of para 1 of notification No. 37/2017-CT.
Issues Involved:
1. Whether the applicant, an SEZ unit, is required to pay GST under the reverse charge mechanism (RCM) on specified services in accordance with notification No. 10/2017-IT(Rate) dated 28.6.2017 as amended from time to time. Summary: Issue 1: Applicability of GST under RCM for SEZ Unit The applicant, M/s Waaree Energies Limited, an SEZ unit, sought an advance ruling on whether they are required to pay GST under the reverse charge mechanism (RCM) for specified services such as Goods Transport Agency (GTA), legal services from an advocate, security services, and bus hiring for employees, as per notification No. 10/2017-IT(Rate) dated 28.06.2017. The applicant argued that as per section 7 of the SEZ Act 2005, they are exempt from GST on services procured from the Domestic Tariff Area (DTA) due to the overriding effect of section 51 of the SEZ Act, 2005. They also referred to various CBIC circulars and notifications, including notification No. 18/2017-IT(Rate) and Circular No. 48/22/2018-GST, which support their claim of exemption from GST under RCM for authorized operations in SEZ. During the hearing, the applicant reiterated their position, emphasizing that Rule 5(5)(a) of the SEZ Rules, 2006, provides exemption from SGST, and Rule 30(1) allows DTA suppliers to clear services to an SEZ unit as zero-rated supplies under section 16 of the IGST Act, 2017. They also cited previous rulings and circulars that support their interpretation. The Authority for Advance Ruling examined the relevant provisions and notifications, including section 5(3) of the Integrated Goods and Services Tax Act 2017, section 16 of the IGST Act, and notification No. 37/2017-CT. The Authority also considered the FAQs on GST and a clarification from the Tax Research Unit, CBIC, which stated that SEZ units can procure services without payment of IGST under RCM if they furnish a Letter of Undertaking (LUT) or bond. The Authority concluded that the applicant, an SEZ unit, is not required to pay GST under RCM on specified services, provided they furnish a LUT or bond as specified in condition (i) of para 1 of notification No. 37/2017-CT. This ruling aligns with the rationale provided in the Maharashtra Appellate Authority for Advance Ruling's order in the case of M/s. Portescap India P Ltd. Ruling:The applicant, an SEZ unit, is not required to pay GST under RCM on specified services in accordance with notification No. 10/2017-IT(Rate) dated 28.6.2017 as amended from time to time, subject to furnishing a LUT or bond as specified in condition (i) of para 1 of notification No. 37/2017-CT.
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