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2024 (4) TMI 844 - AAR - GSTSEZ unit - liability pay tax under reverse charge mechanism on services received from advocate by virtue of Notification No. 10/2017-Integrated tax Rate (as amended 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 It is, therefore clarified that 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 1 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, we find that 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 LUT 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 an SEZ unit is required to pay tax under reverse charge mechanism (RCM) on services received from an advocate. 2. If affirmative, under which tax head (IGST or CGST and SGST) should the tax under RCM be paid. Summary: Issue 1: Tax Liability Under Reverse Charge Mechanism The applicant, an SEZ unit, sought clarification on whether it is required to pay GST under RCM on services received from an advocate as per Notification No. 10/2017-Integrated Tax (Rate). The applicant argued that supplies to SEZ units are zero-rated u/s 16 of the IGST Act, 2017, and thus should be exempt from GST under RCM. They referenced Rule 5(5)(a) and Rule 30(1) of the SEZ Rules, 2006, and Notification No. 18/2017-IT (Rate) which exempts services imported by an SEZ unit for authorized operations. Additionally, they cited Section 51 of the SEZ Act, 2005, which has an overriding effect over other laws. The Authority for Advance Ruling (AAR) noted that the FAQs on GST clarify that SEZ units must pay IGST under RCM when receiving supplies. However, Notification No. 37/2017-CT allows SEZ units to procure services without payment of IGST by furnishing a Letter of Undertaking (LUT) or bond. The AAR also referred to a clarification from the Tax Research Unit, CBIC, which supports the applicant's position. Ruling: The AAR ruled that 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), subject to furnishing a LUT or bond as specified in Notification No. 37/2017-CT. Issue 2: Tax Head for Payment Under RCM Given the ruling on the first issue, the second question regarding the tax head under which the RCM payment should be made was rendered infructuous.
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