2018 (5) TMI 759 - AAR - GST

Supply of goods & services to SEZ or not - intra-state supply - Place of Provision Rules - Whether the Hotel Accommodation & Restaurant services provided by them, within the premises of the Hotel, to the employees & guests of SEZ units, be treated as supply of goods & services to SEZ units in Karnataka or not? Held that - On reading Section 16(1)(b) of IGST Act 2017 & Rule 46 of CGST Rules 2017 together it is clearly evident that the supplies of goods or services or both towards the authorised operations only shall be treated as Supplies to SEZ Developer /SEZ Unit. Since place of provision of services in case of Hotel has been prescribed under the Act location of the Hotel the rendition of services of restaurant, short term accommodation and Banqueting/conferencing cannot be said to have been imported or procured into SEZ Unit/ Developer. Hence, by no stretch of imagination and therefore, in the instant case, the supply is intra state supply. Ruling - The Hotel Accommodation & Restaurant services being provided by the Applicant, within the premises of the Hotel, to the employees & guests of SEZ units, can not be treated as supply of goods & services to SEZ units in Karnataka & hence the intra state supply and are taxable accordingly.

Summary

Issues:
1. Whether hotel accommodation and restaurant services provided within the premises of the hotel to the employees and guests of SEZ units should be treated as supply of goods and services to SEZ units in Karnataka.

Analysis:
The applicant, a company engaged in the hotel business, filed an application for advance ruling seeking clarification on the tax treatment of services provided to employees and guests of SEZ units. The SEZ units contended that the services should be treated as supply to SEZ units, hence attracting a NIL rate of GST. The applicant argued that they are not part of the SEZ, bill SEZ companies for services, and have not entered into any contracts with the SEZ units.

During the personal hearing, the authorized representative reiterated the company's position and stated that the services provided are not part of authorized SEZ operations. The Authority considered the submissions and relevant provisions of the CGST Act and IGST Act. They noted that supplies to SEZ units are zero-rated under Section 16(1)(b) of the IGST Act and Rule 46 of the CGST Rules, provided they are for authorized operations.

The Authority analyzed the place of supply rules under the IGST Act, which determine the taxability of services based on the location of the immovable property or where the services are performed. Since the applicant's hotel is located outside the SEZ and the services are not part of authorized SEZ operations, they concluded that the supply is an intra-state supply and taxable accordingly.

Therefore, the Authority ruled that the hotel accommodation and restaurant services provided by the applicant to the employees and guests of SEZ units cannot be treated as supply to SEZ units in Karnataka. Instead, they are considered intra-state supplies and subject to taxation as such.