SEZ-Supply of Services like Hotel Accommodation, Event Management ,Conference ,Banqueting etc. are Inter State or Intra State?  

Back Ground: 

As per section 16(1)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) ,supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit is zero rated supply.

As per section 7(5) (b) of the IGST Act, 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.

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 as per section 12(3)(c) such services will be intra state supply however section 7(5)(b) such supply is interstate supply.

For this issue one advance ruling is available and also CBIC has issued a circular. Both contains contradictory view and has been summarized below:

AAR RULING in case of M/S GOGTE INFRASTRUCTURE DEVELOPMENTCORPORATION LIMITED dated 21^st March 2018 by Advance Ruling Authority of Karnataka:

Issue before Authority:  Whether the Hotel Accommodation & Restaurant services provided by them, within the premises of the Hotel, to the employees & guests of SEZ units, be treated as supply of goods & services to SEZ units in Karnataka or not ?"

Decision : Since place of provision of services in case of Hotel has been prescribed under t}le Act `location of the Hotel` the rendition of services of restaurant, short term accommodation and Banqueting/conferencing cannot be said to have been `imported or procured` into SEZ Unit/Developer. Hence, by no stretch of imagination and therefore, in the instant case, the supply is intra state supply.

The Hotel Accommodation & Restaurant services being provided by the Applicant, within the premises of the Hotel, to the employees & guests of SEZ units, cannot be treated as supply of goods & services to SEZ units in Karnataka & hence the intra state supply and are taxable accordingly`

Circular No. 48/22/2018-GST dated 14th June, 2018 titled “Circulars clarifying miscellaneous issues related to SEZ and refund of unutilized ITC for job workers” issued by CBIC;

Issue 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)?

Clarification: 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.

Issue 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?

Clarification: Supplies to a SEZ developer or a SEZ unit shall be zero rated and the supplier shall be eligible for refund of taxes 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.

Open Issue : whether circular issued by CBIC will be binding on CGST officers ,SGST Officers Both?

A five member constitutional bench of Supreme Court delivered the landmark judgment in the case of Collector of C. Ex., Vadodara v/s Dhiren Chemical Industries [2002 (139) ELT 3 (SC)]. In this case, it was held that if there are circulars issued by the CBEC which place an interpretation which is inconsistent with the interpretation taken by the Supreme Court, then Revenue will be bound to follow the interpretation taken by the Board. Thus, it was clearly held that the Board circulars will be binding on Department even if a different interpretation has been given by the Supreme Court.

As per Section 6 of the CGST ACT 2017 officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of CGST Act, and similar provision are contained in respective SGST and UTGST Acts.

There is no doubt of having persuasive value of circulars issued by CBIC on SGST/UTGST officer however it will have binding value also as SGST/UTGST officers are empowered to act under CGST ACT.