In a recent case, the Gujarat Authority For Advance Ruling ( AAR ) has held that the Special Economic Zone ( SEZ ) is not required to pay Goods and Service Tax ( GST ) under Reverse Charge Mechanism ( RCM ) for legal services received by Virtue of Notification on Central Tax Rate.
M/s Abans Alternative Fund Manager LLPIFSC, the applicant is engaged in providing the services of holding securities and other assets of trusts and funds and similar financial entities, falling under the SAC code 9971 72. The applicant was granted approval by KASEZ vide letter.
The applicant acts as an Investment Manager for managing the schemes floated by the Category-Ill Alternative Investment Fund ( AIF ), registered under the International Financial Services Centres Authority Act, 2019 and has a continuing interest in the said Alternative Investment bund ( AIF ) as specified by IF SCA from time to time.
The applicant has availed the service from Advocate Prajesh Shah towards the execution of the lease agreement for the premise in GIFT City, Gandhinagar. The applicant is the fund manager of Abans Investment Trust.
It was observed that in terms of sections 7(5) and 16 of the IGST Act, 2017, the supply of services made to an SEZ unit for carrying out the authorised operation in an SEZ is considered a zero-rated supply. The supply to SEZ is considered an inter-state supply and when the same is used for authorized operations it will be zero-rated.
It was stated that CBIC Circular No 48/22/2018-GST dated 14.06.2018, clarifies treating of supplies to SEZ units as inter-state supplies. It is the policy of the Government to allow tax-free procurement of goods and services in an SEZ. In terms of section 51 of the SEZ Act 2005, the provisions of SEZ Act would have overriding effect on provisions of any other legislation including taxation laws. In Rule 5(5)(a) of the SEZ Rules, 2006, provides exemption to SEZ from State Goods and Services Tax [ SGST ].
The applicant has also raised an alternative plea that even assuming that RCM notification is applicable then also they could exercise the option of supply of services under LUT etc. without payment of IGST as provided in respect of supplies made from DTA to an SEZ unit specifically under section 16(3) of the IGST Act, 2017.
The Authority comprised of Milindtkar and Amit Kumar observed that the applicant, an SEZ unit, can procure the services mentioned for use in authorized operations without payment of IGST provided the applicant, furnishes a LUT or bond as specified in condition (i) of Para I of notification No. 37/2017-CT.
The authority held that the applicant, an SEZ unit, is not required to pay GST under RCM on specified services under notification No. 10/2017-1T(Rate) dated 28.6.2017 as amended from time to time, subject to furnishing a LUT or bond as specified in condition (i) of 1 of notification No. 37/2017-CT
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