GST under RCM not applicable on services of renting of immovable property by SEZ on furnishing LUT

The Maharashtra Appellate Authority of Advance Ruling (AAAR Maharashtra) has ruled out that GST under RCM not applicable on services of renting of immovable property by SEZ on furnishing LUT.

The Appellant is a private limited company incorporated in India and registered under Companies Act, 1956. The Appellant has obtained GST registration, having GSTIN: 27AAACK4896K1ZZ, for its office situated at Unit no. 2, SDF-1, SEEPZ-SEZ, Andheri East, Mumbai, Maharashtra-400096.

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.

DISCUSSIONS AND FINDINGS:

We have carefully gone through the appeal memorandum encapsulating the facts of the case and the grounds of the appeal along with other relevant documents. We have also examined the impugned advance ruling passed by the Maharashtra Advance Ruling Authority, wherein it has been held that the Appellant are liable to pay IGST on the impugned services, i.e., services of renting of immovable property, under RCM in accordance with the Notification No. 10/2017-1.T. (Rate) dated 28.06.2017 as amended by the Notification No. 03/2018-1.T. (Rate) dated 25.01.2018. As regards question regarding the applicability of GST on any other services received by the Appellant from the suppliers located in DTA, the MAAR has held that since the Appellant has not specified the services being procured from DTA suppliers, the said question regarding applicability of GST thereon cannot be answered. The MAAR in the impugned order has inter alia observed that SEEPZ SEZ is a SEZ developer, and hence section 16(3) of the IGST Act, 2017 will not be applicable to the Appellant as the impugned supply of renting of immovable property services are taking place between the SEZ developer and SEZ unit, and not between a supplier located in DTA and SEZ unit as contemplated in the above provisions of section 16(3) ibid.

On perusal of the impugned Advance Ruling Order vis- a- vis the submissions made by the Appellant in defence of their case, the moot issues before us are as under:

i) Whether the impugned supply of renting of immovable property services provided by the SEZ Authority is zero-rated supply in terms of section 16(1) of the IGST Act, 2017;

ii) Whether the supply of any other services by the suppliers located in DTA to the SEZ unit is zero-rated supply in terms of section 16(1) of the IGST Act. 2017.

Thus, on perusal of the aforesaid provisions of the zero-rated supply, it is clear 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 reverse charge Notification 10/2017-1.T. (Rate) dated 28.06.2017 as amended by Notification No. 03/2018-1.T. (Rate) dated 25.01.2018. This is so because settled it is the 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 provision or 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 (l) of the 1GST Act, 2017. By virtue of deeming provision under section 5 (3) of the 1GST 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.

ORDER

We, hereby, set aside the Advance Ruling No. GST-ARA-93/2019-20/B-I10 dated 10.12.2021, passed by the MAAR and hold as under:

(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.

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