1. Issue :
Whether services of short-term accommodation, conferencing ,banqueting
etc. provided to a Special Economic Zone (SEZ) developer or a SEZ unit should
be treated as an interstate supply (under section 7(5)(b) of the IGST Act,
2017) or an intra-State supply (under section 12(3)(c) of the IGST Act, 2017)?
Clarification
1.1 As per section
7(5) (b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act in
short), the supply of goods or services or both to a SEZ developer or a SEZ
unit shall be treated to be a supply of goods or services or both in the course
of inter-State trade or commerce.
Whereas, as per
section 12(3)(c) of the IGST Act, the place of supply of services by way of
accommodation in any immovable property for organising any functions shall be
the location at which the immovable property is located.
Thus, in such cases,
if the location of the supplier and the place of supply is in the same State/
Union territory, it would be treated as an intra-State supply.
1.2 It is an
established principle of interpretation of statutes that in case of an apparent
conflict between two provisions, the specific provision shall prevail over the
general provision.
1.3 In the instant
case, section 7(5)(b) of the IGST Act is a specific provision relating to
supplies of goods or services or both made to a SEZ developer or a SEZ unit, which
states that such supplies shall be treated as inter-State supplies.
1.4 It is therefore,
clarified that services of short term accommodation, conferencing, banqueting
etc., provided to a SEZ developer or a SEZ unit shall be treated as an
inter-State supply.
2. Issue :
Whether the benefit of zero rated supply can be allowed to all procurements
by a SEZ developer or a SEZ unit such as event management services, hotel and
accommodation services, consumables etc?
Clarification
2.1 As per section
16(1) of the IGST Act, “zero rated supplies” means supplies of goods or services
or both to a SEZ developer or a SEZ unit. Whereas, section 16(3) of the IGST
Act provides for refund to a registered person making zero rated supplies under
bond/LUT or on payment of integrated tax, subject to such conditions,
safeguards and procedure as may be prescribed. Further, as per the second
proviso to rule 89(1) of the Central Goods and Services Tax Rules, 2017 (CGST
Rules in short), in respect of supplies to a SEZ developer or a SEZ unit, the
application for refund shall be filed by the:
(a) supplier of
goods after such goods have been admitted in full in the SEZ for authorised
operations, as endorsed by the specified officer of the Zone;
(b) supplier of
services along with such evidences regarding receipt of services for authorised
operations as endorsed by the specified officer of the Zone.
2.2 A conjoint
reading of the above legal provisions reveals that the supplies to a SEZ
developer or a SEZ unit shall be zero rated and the supplier shall be eligible
for refund of unutilized input tax credit or integrated tax paid, as the case may
be, only if such supplies have been received by the SEZ developer or SEZ unit
for authorized operations. An endorsement to this effect shall have to be
issued by the specified officer of the Zone.
2.3 Therefore,
subject to the provisions of section 17(5) of the CGST Act, if event management
services, hotel, accommodation services, consumables etc. are received by a SEZ
developer or a SEZ unit for authorised operations, as endorsed by the specified
officer of the Zone, the benefit of zero rated supply shall be available in
such cases to the supplier.
3. Issue:
Whether
independent fabric processors (job workers) in the textile sector supplying job
work services are eligible for refund of unutilized input tax credit on account
of inverted duty structure under section 54(3) of the CGST Act, 2017, even if
the goods (fabrics) supplied are covered under notification No. 5/2017-Central
Tax (Rate) dated 28.06.2017?
Clarification
3.1 Notification No.
5/2017-Central Tax (Rate) dated 28.06.2017 specifies the goods in respect of
which refund of unutilized input tax credit (ITC) on account of inverted duty structure
under section 54(3) of the CGST Act shall not be allowed where the credit has accumulated
on account of rate of tax on inputs being higher than the rate of tax on output
supplies of such goods. However, in case of fabric processors, the output
supply is the supply of job work services and not of goods (fabrics).
3.2 Hence, it is clarified
that the fabric processors shall be eligible for refund of unutilized ITC on
account of inverted duty structure under section 54(3) of the CGST Act even if
the goods (fabrics) supplied to them are covered under notification No. 5/2017-Central
Tax (Rate) dated 28.06.2017.
(CBDT, Circular
No.48/22/2018, Dated: 14-06-2018)
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