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Clarifying miscellaneous issues related to SEZ and refund of unutilized ITC for job workers of textiles even if fabric is covered under notification no. 5/2017 dated 28/06/2017

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Clarifying miscellaneous issues related to SEZ and refund of unutilized ITC for job workers of textiles even if fabric is covered under notification no. 5/2017 dated 28/06/2017 View Pdf   

Circular No: 48/22/2018-CT
F. No: CBEC/20/16/03/2017-GST
Circular: Refund
Date: 14-06-2018
 
 
Subject: Clarifications of certain issues under GST– regarding
 
         Representations have been received seeking clarification on certain issues under the GST laws. The same have been examined and the clarifications on the same are as below:
 
Sl.
No.
Issue
Clarification
1.
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 inter- State 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)?
        
     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. 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.
  2.  
  3. 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.
  4.  
  5. 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.
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?
  1. 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:
  2.  
  3. (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.
Whether    independent                   fabric
  1. 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).
  2.  
  3. 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.
 
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?
 
2.     It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
 
3.     Difficulty if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.
 
 
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View Pdf  48/22/2018-CT