2018 (10) TMI 449 - AAR - GST

Levy of GST - hospitality services - The hotel being located in non-processing zone of Dahez Special Economic Zone whether liable to pay GST on all the services provided by it to the clients located in SEZ which inter-alia included supply of services by way of providing accommodation services, supplying food and beverages and supplying services ancillary to providing accommodation services? Under extreme circumstances, if the hotel is required to provide accommodation services to a visitor other than a visitor located in SEZ, whether GST is required to be paid? Held that - The provisions of Section 7 and Section 8 of IGST Act, 2017 read with the definition of SEZ developer given at Section 2(20) of IGST Act, mandate that all the supply of goods or services made by or to SEZ Co-developer would be considered as interstate supply and the levy of IGST is attracted at the applicable rate. But the IGST law allows the benefit of zero rating to supplies made to an SEZ unit. As per Section 16(1) of IGST Act zero rated supply means any of the following supply of goods or services or both namely (a) export of goods or services or both ; or (b) supply of goods or services or both to a SEZ developer or SEZ Unit. Section 2(m)(iii) of SEZ Act, 2005 defines export means supplying goods, or providing services, from one unit to another unit or developer, in the same or different special economic zone. A combined reading of Section 16(1) of IGST Act and Section 2(m)(iii) of SEZ Act indicate that supply of services made by the applicant to other units or developers of SEZ would be zero rated supply. Rendering of services from SEZ to DTA does not qualify as Zero rated supply in terms of Section 16 of IGST Act, 2017. Therefore, SEZ Unit/developer making interstate supply to DTA would be liable to pay IGST under IGST Act. Therefore, supply of services by the SEZ unit or Developer from SEZ to DTA would be covered under the normal course of supply. Accordingly the applicant will be liable to pay GST at the prescribed rates for supplies made to the clients located outside the territory of SEZ. Ruling - The supplies made by M/s. Sapthagiri Hospitality Private Limited, 17-18, Sapthagiri Complex, Opp. The Gateway Hotel, Near Akota Garden, Akota, Vadodara-390 002, a SEZ Co-developer, from their hotel located in non-processing zone of Dahez Special Economic Zone to the clients located in Special Economic Zone for authorized operations will be treated as zero rated supplies under the provisions of Section 16(1) of Integrated Goods and Service Tax Act, 2017 read with Section 2(m) of SEZ Act, 2005. The applicant is liable to pay GST on the services from their hotel located in non-processing zone of Dahez Special Economic Zone to the clients located outside the territory of Special Economic Zone under the provisions of Section 5(1) of Integrated Goods and Service Tax Act, 2017.

Summary

Issues:
1. Liability to pay GST on services provided by a hotel in a non-processing zone of a Special Economic Zone (SEZ) to clients within and outside the SEZ.

Analysis:
The applicant, a SEZ Co-developer, sought an advance ruling regarding the liability to pay GST on services provided by their hotel in a non-processing zone of a SEZ to clients within and outside the SEZ. The applicant contended that as per Section 16(1)(b) of the IGST Act, services provided by a company running a hotel in an SEZ should be considered 'zero rated supply,' exempting them from GST liability. They argued that the place of supply, being the location of the hotel within the SEZ, should not attract GST. The applicant raised specific questions regarding the liability to pay GST on accommodation services, food and beverages, and ancillary services provided within the SEZ and to visitors from outside the SEZ.

Upon hearing the submissions and reviewing the relevant provisions, the Authority for Advance Ruling analyzed the definitions under the IGST Act, 2017 and the SEZ Act, 2005. They highlighted that supplies made by the applicant to other units or developers within the SEZ would indeed qualify as zero-rated supplies. However, the ruling clarified that services provided from the SEZ to the Domestic Tariff Area (DTA) do not fall under zero-rated supplies, making the SEZ unit or developer liable to pay IGST for interstate supplies to the DTA. Consequently, the applicant was deemed liable to pay GST at the prescribed rates for services provided to clients located outside the SEZ.

In conclusion, the ruling specified that services offered by the applicant to clients within the SEZ for authorized operations would be treated as zero-rated supplies under the IGST Act, while services provided to clients outside the SEZ would attract GST liability under the provisions of the IGST Act, 2017. The judgment provided clarity on the distinction between zero-rated supplies within the SEZ and taxable supplies to clients outside the SEZ, ensuring compliance with the relevant GST regulations in the context of SEZ operations.