SEZ unit not required to pay GST under RCM


SEZ unit not required to pay GST under RCM


Here is one welcome Ruling which will put to rest a lot of controversy & confusion with regard to the applicability of the GST under RCM to the SEZ unit.

Recently, Appellate Authority for Advance Ruling, Maharashtra in the case of Portescap India Pvt. Ltd held that GST is not payable under reverse charge mechanism where the recipient is a SEZ unit.

Let us have at some of the key observations of the authority are as follows:

1. This is so because it is the settled proposition of the law that the specific provisions made in the Act will have greater legal force than that of a notification issued under the same or any other provisions of 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.

2. 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 anything about the type of the supplier. That is, whether the supplier supplying the services is located in DTA or in the 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.

3. 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 from SEEPZ SEZ, if appellant furnishes LUT.

4. The aforesaid principle will also be applicable in other cases i.e., 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.