In re Portescap India Private Limited (GST AAAR Maharashtra)
AAAR held that any supply of goods or services or both made to a SEZ developer or SEZ unit for carrying out the authorised operation in SEZ will be considered as zero-rated supply. That is, the said supply will not attract any GST whatsoever. It is further mentioned here that this provisions of zero-rated supply will cover even the supply of services which are specified under the reverse charge Notification 10/2017-I.T. (Rate) dated 28.06.2017 as amended by Notification No. 03/2018- C.T. (R) dated 25.01.2018. This is so because it is the settled proposition of the law that the specific provisions made in the Act will have greater legal force than that of a notification issued under same or any other provisions of the same Act. Hence the provisions laid down under section 16(1) of the IGST Act, 2017 will supersede over the notification issued under section 5(3) of the IGST Act, 2017, which enumerates the services which attract GST under reverse charge basis. It is also pertinent to mention here that the said provision of section 16(1) ibid, merely mentions about the supply of goods or services or both to the SEZ developer or SEZ unit. The said provision does not mention any thing about the type of the supplier. That is, whether the supplier supplying the services is located in DTA or in SEZ area. As long as the supply is being made to SEZ developer or SEZ unit for carrying out the authorised operation in SEZ, the same will be treated as zero-rated supply, and will not be subject to GST. Therefore, it will not matter in the present case that the impugned services of renting of immovable property is being provided by the SEZ developer, i.e. SEEPZ SEZ to the Appellant, and not by a supplier located in DTA as observed by the MAAR in the impugned ruling while holding that the provisions of section 16(1) ibid, will not be applicable in the Appellant’s case as the impugned services of renting of immovable property is not being provided by the supplier located in DTA rather the same is being supplied by the SEZ developer, i.e., SEEPZ SEZ, hence the facility of LUT is not available to the Appellant as proposed by them. Thus, the contention put forth by the Respondent that the said services are being supplied by the SEZ developer, and not be supplier located in DTA does not hold water, and hence not sustainable.
From the provisions of section 16 (1) and Section 5 (3) of IGST Act it is clear that the intention of the legislature is not to tax the supplies made to a unit in SEZ or a SEZ developer, which has been made zero rated under clause (b) of section 16 (1) of the IGST Act. 2017. By virtue of deeming provision under section 5 (3) of the IGST Act, 2017, the levy on procurement of services specified in Notification 13/2017 CT (Rate) falls upon the unit in SEZ or SEZ developer. Therefore, a unit in SEZ or SEZ developer can procure such service for use in authorised operation without payment of integrated tax provided the actual recipient i.e. SEZ unit or SEZ developer, furnishes a LUT or bond as specified in condition (i) of para I of notification No. 37/2017-CT. The actual recipient here in the subject supplies is a deemed supplier for the purpose of aforesaid condition. The appellant will not be required to pay any GST under RCM on the impugned supply of renting of immovable property services received SEEPZ SEZ, if appellant furnishes LUT.
Further, as regards any other services supplied by the DTA to the SEZ unit or developer, it is stated that the aforesaid principle will also be applicable in such cases. That is all the supply of services procured by SEZ unit from the suppliers located in DTA for carrying out the authorised operation in SEZ will not attract any GST in accordance with the provision of section 16(1) of the IGST Act, 2017, and the Appellant will not be required to pay any GST under RCM on the services received from DTA supplier for carrying out the authorized operation in SEZ, subject to LUT.
42. Thus, in view of the above discussions and findings, we pass the following order:
(i) that the Appellant are not required to pay GST under RCM on the impugned services of renting of immovable property services received from SEEPZ SEZ for carrying out the authorised operation in SEZ subject to furnishing of LUT or bond as a deemed supplier of such services;
(ii) that the Appellant are not required to pay GST under RCM on any other services received from the suppliers located in DTA for carrying out the authorized operation in SEZ subject to furnishing of LUT or bond as a deemed supplier of such services.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING MAHARASHTRA
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
2. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by M/s. Portescap India Private Limited (“the Appellant”) against the Advance Ruling No. GST-ARA-93/2019-20/B-110, dated 10.12.2021 pronounced by the Maharashtra Authority for Advance Ruling (MAAR).
Read Also AAR Order:- GST payable under RCM on procurement of renting of immovable property services from Seepz
BRIEF FACTS OF THE CASE
3.1 The Appellant is a private limited company incorporated in India and registered Companies Act, 1956. The Appellant has obtained GST registration, having GSTIN: 27AAACK4896K1ZZ, for its office situated at Unit no. 2, SDF-I, SEEPZ-SEZ, Andheri East, Mumbai. Maharashtra-400096.
3.2 The Appellant are inter alia engaged in manufacturing of customized motors in India. As the Appellant is an SEZ Unit, it is engaged in exports of the manufactured goods outside India.
3.3 The Appellant procures Rental Services from “Santacruz Electronics Export Processing Zone” (hereinafter referred to as “SEEPZ”) SEZ Authority, situated at SEEPZ service centre building, Andheri East, Mumbai-400096, which is a Local authority having GSTIN 27AAALS4995G1ZH. Additionally, other services like Advocate Services and Gate Pass Services from SEEPZ are being procured wherein GST is presently being discharged by the Appellant under the Reverse Charge Mechanism.
3.4 As per the Notification No. 18/2017 – Integrated Tax (Rate) dated 05.07.2017, the Central Government exempts services imported by a unit or a developer in the Special Economic Zone for authorized operations, from the whole of the integrated tax leviable thereon under section 5 of the Integrated Goods and Service Tax Act, 2017.
3.5 The Appellant further submits that the objective of government, according a special status to SEZs include, inter-alia, allowing tax free procurement of goods and services with support in basic essential infrastructure facility for production of goods or services. To further add, Section 7 of SEZ Act 2005 provides for exemption to all goods or services procured from a DTA (Domestic Tariff Area) or foreign suppliers specified in first schedule. According to Section 51 of the SEZ Act 2005, the provisions of SEZ Act would have overriding effect on provisions of any other act including taxation laws.
3.6 Further Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, the Central Government has exempted Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed five thousand rupees subject to the proviso. Additionally, in accordance with the Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017 read with Notification No. 03/2018 – Central Tax (Rate), Services supplied by Central Government, State Government, Union territory or local authority to a business entity, the recipient of service is required to pay tax on reverse charge mechanism.
Advance Ruling Application filed by Appellant
3.7 The Appellant had filed an application dated 07.01.2020 before the MAAR, seeking a ruling on the following questions:-
(i) Whether an SEZ unit is required to comply with the reverse charge mechanism as a service recipient for local/domestic renting of immovable property services procured by the unit from SEEPZ Special Economic Zone Authority (Local Authority) in accordance with Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017 read with Notification No. 03/2018 – Central Tax (Rate) dated 25.01.2018?
(ii) Whether an SEZ unit is required to pay tax under reverse charge mechanism on any other services in accordance with Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017 read with Notification No. 03/2018 – Central Tax (Rate) dated 25.01.2018?
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