The Gujarat Authority for Advance Ruling ( AAR ) has ruled that Special Economic Zone ( SEZ ) Units are exempted from Goods and Service Tax ( GST ) under the Reverse Charge Mechanism ( RCM ) for Specified Services if they furnish a Letter of Undertaking ( LUT )/Bond.
M/S Waaree Energies Limited, the applicant is engaged in the manufacture of solar modules. They are registered under the category of taxpayer as an “SEZ Unit”. It was submitted that the applicant in terms of notification No. 10/2017-111 Rate ) dated 28.06.2017, as a service recipient of the above-mentioned specified services is liable to pay GST under RCM.
The applicant believes that being an SEZ Unit, they are not liable for GST under RCM as section 7 of SEZ Act 2005, provides for exemption to all services procured from a ( Domestic Tariff Area ) or foreign suppliers specified in the first schedule.
The CBIC has issued a clarification in the context of RCM on procurement of service by the International Financial Services Centre, SEZ to the effect that a unit in SEZ can procure services where they are required to pay GST under RCM, without payment of Integrated tax providing unit, furnishes a Letter of Undertaking in place of a bond as specified in Para I of notification no. 37/2017-CT.
The applicant’s case is that in respect of the four services that they avail from DTA viz GTA, legal services from advocate, security services, bus hiring for employees, a recipient of service is required to pay GST under RCM in terms of notification No. 10/2017-IT ( Rate ) dated 28.06.2017.
The CBIC clarified that a unit in SEX 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 —Central Tax dated 4.10.2017.
The AAR comprising Milind Kavatkar and Amit Kumar Mishra held that the applicant, an SEZ unit, is not required to pay GST under RCM on specified services under notification No. 10/2017-IT( Rate ) dated 28.06.2017 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 – Central Tax dated 4.10.2017
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