Supply of goods by Cafe Coffee Day to the SEZ units is not deemed export and will be liable for GST

Supply of goods by Cafe Coffee Day to the SEZ units is not deemed export and will be liable for GST

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Supply of goods by Cafe Coffee Day to the SEZ units is not deemed export and will be liable for GST

Facts of the case:

  1. M/s Coffee Day Global Limited is engaged in supply of non-alcoholic beverages to SEZ units using coffee vending machines and undertakes the following types of transactions:
    1. The applicant installs beverage vending machines inside SEZ premises, prepares beverages using the vending machines 85 its ingredients, supplies to SEZ units which are consumed by the employees of SEZ units and charge the SEZ units based on number of cups of beverages supplied. (Cuppage billing)
    2. The applicant installs beverage vending machines inside SEZ premises, supplies beverage ingredients to the SEZ units and bills based on the quantity of ingredients supplied. SEZ units prepare the beverages using the vending machines and serve them to its employees. There will not be any consideration for the usage of vending machine by the SEZ units.
  2. The Applicant contends that all supplies to SEZ, without any distinction, have been declared to be zero-rated supplies by Section 16 of the IGST Act’ 2017. According to rule of inputs being used for authorized operations.
  3. However the provisions of the Act have the ability to silence the provisions contained in the rules to the extent they are inconsistent with the Act. Therefore, the supplies to the SEZ units are in the nature of zero rated supplies not withstanding that they are not used for authorized operations

 

 

  1. In view of the above, the applicant filed this instant application seeking advance ruling on the following issue :

“Whether supply of non-alcoholic beverages to SEZ units using coffee vending machines is in the nature of zero rated supply as defined under Section 16 of the IGST Act 2017 ?”

 

Held:

Following observations were made by the Authority:

  1. Any supply of goods or services to SEZ units is zero rated. A Person making zero rated supplies can claim refund of input tax credits or claim refund of IGST paid on such supplies, as per Section 16 of IGST Act’2017
  2. The phrase “any supplies” would cover everything, including beverages and ingredients for beverages, if literal interpretation is Zero-rated supply as defined in Section 16(1) of the IGST Act, 2017, means any of the following supplies of goods or services or both namely:-
    1. export of goods or services or both; or
    2. supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
  3. The applicant undertakes two types of transactions. In the first type of transaction the applicant installs beverage vending machines inside SEZ premises, prepares beverages using the vending machines 85 its ingredients, supplies to SEZ units which are consumed by the employees of SEZ units and charge the SEZ units based on number of cups of beverages supplied. (Cuppage billing).
  4. In the second type of transaction the applicant installs beverage vending machines inside SEZ premises, supplies beverage ingredients to the SEZ units and bills based on the quantity of ingredients supplied. SEZ units prepare the beverages themselves using the vending machines and serve them to its employees. There will not be any consideration for the usage of vending machine by the SEZ units.
  5. The applicants’ contention is that any supply of goods or services to SEZ units is zero-rated and interprets that the phrase ‘any supply’ would cover everything, including beverages and ingredients for beverages.
  6. The Rule related to refund stipulates that the supply, in respect of which tax had been paid and refund is sought, shall be necessarily for authorized operations. Therefore even in the event of the IGST Act, 2017, not explicitly using the term ‘authorised operations’ in Section 16(1)(b), it is implicit that the supply of goods or services or both described in Section 16(1)(b) have to be read as in relation to authorized operations.
  7. The applicant has not made out a case that the activity undertaken by them is certified as an authorized operation by the proper officer of the SEZ. We are, thus, of the considered opinion that the activity undertaken by the applicant does not qualify to be a zero-rated supply.
  8. The supply of non-alcoholic beverages / ingredients to such beverages, to SEZ units using coffee vending machines by the applicant, do not qualify as zero rated supply, as defined under Section 16 of the IGST Act’2017.

 

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