2019 (10) TMI 619 - AAR - GST

Rate of IGST - invoices raised to the SEZ Units, even if the accommodation services were rendered outside the SEZ Zone - inter-state supply or not - HELD THAT - T he provisions in Section 7(5)(b) of the IGST Act, 2017 overrides the provisions in Section 12(3)(c) of the IGST Act, 2017 and hence the transaction of the applicant is an inter-State supply of services, provided that the supply of services made to the SEZ Unit is an authorized operation under the SEZ Act. The applicant has also provided the copy of the Circular No.2/2014 dated 25.07.2014 issued by the Development Commissioner, Office of the Zonal Development Commissioner (Kerala and Karnataka Special Economic Zones) to all Developer, Co-Developers and Units of SEZs located in Kerala and Karnataka, in which it is stated that the Accommodation Services are added to the list of services to enable the SEZ Units to avail service tax benefits for their authorized operation - In view of the above, if the SEZ Unit is procuring the accommodation services for their authorized operation, the same would be covered under supply to SEZ Units and hence would be inter-State supplies and would be a zero-rated supply under sub-section (1) of section 16 of the IGST Act, 2017. In case of services provided to the SEZ Unit is not for authorized operations, then they would not be treated as supplies to SEZ Units and would not be covered under the zero-rated supplies but still would be a transaction covered under the IGST Act, 2017 and taxable at 18% with the place of supply being the provision of such services.

Summary

Issues:
- Interpretation of IGST applicability for accommodation services provided to SEZ Units outside the SEZ Zone.

Analysis:
The applicant, a Proprietary concern, sought an advance ruling on the IGST applicability for invoices raised to SEZ Units for accommodation services rendered outside the SEZ Zone. The applicant stated that although their business, "The Pommels," is located outside the SEZ Zone, they provide accommodation services to SEZ Unit employees as per the SEZ Unit's instruction to raise invoices with IGST at 0%. The authorized representative reiterated these points during the hearing.

The Authority analyzed the transaction and found that the SEZ Unit, being liable to pay for the accommodation services, qualifies as the recipient under the CGST Act. Referring to the IGST Act, the Authority determined that the transaction constitutes an inter-State supply of services to the SEZ Unit, as per section 7(5)(b) of the IGST Act. A circular clarified that services provided to SEZ Units are considered inter-State supplies, overriding any conflicting provisions.

Further, the applicant provided a circular stating that accommodation services for SEZ Units are zero-rated for authorized operations under Section 16(1) of the IGST Act, benefiting from service tax exemptions. However, if the services are not for authorized operations, they are taxable at 18% IGST. The ruling confirmed that accommodation services to SEZ Units are inter-State supplies, zero-rated for authorized operations, and taxable at 18% for non-authorized operations.

In conclusion, the ruling clarified that accommodation services provided to SEZ Units outside the SEZ Zone are inter-State supplies, subject to zero-rated tax for authorized operations and 18% IGST for non-authorized operations. The judgment provided detailed analysis based on relevant legal provisions and circulars to determine the IGST applicability for such transactions.