GST Vidhi | GST Advance Ruling

Authority For Advance Ruling: Gujarat

Order Number: GUJ/GAAR/R/2024/08                     Order Date: 16/04/2024

M/s Abans Alternative Fund Manager LLP

Summary of Case: The applicant sought a ruling on whether they are required to pay tax under the reverse charge mechanism on services received from an advocate, by virtue of Notification No. 10/2017 Integrated Tax Rate (as amended from time to time).

Relevant Sections:

• Section 7(5) of the IGST Act, 2017
• Section 16 of the IGST Act, 2017
• Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017
• Notification No. 18/2017-IT (Rate) dated 05.07.2017

Facts of the Case and Nature of Business of Applicant:

• The applicant, M/s Abans Alternative Fund Manager LLP, is an SEZ unit located in Gift SEZ, Gandhinagar.
• They are engaged in providing services of holding securities and other assets of trusts and funds, and similar financial entities.
• They act as an Investment Manager for managing schemes floated by the Category-III Alternative Investment Fund (AIF), registered under the International Financial Services Centres Authority Act, 2019.
• The applicant availed the service from Advocate Rajesh Shah for executing a lease agreement for premises in GIFT City, Gandhinagar.

Question Raised in Application:

1.     Whether an SEZ unit (the applicant) is required to pay tax under the reverse charge mechanism on services received from an advocate by virtue of Notification No. 10/2017 Integrated Tax Rate (as amended from time to time)?

2.     If the answer to the above point is in the affirmative, under which tax head (IGST, CGST, and SGST) is the tax under the reverse charge mechanism required to be paid?

Submission by Applicant:

• The applicant contended that under sections 7(5) and 16 of the IGST Act, 2017, the supply of services to an SEZ unit for authorized operations is considered a zero-rated supply.
• They referred to various provisions and notifications indicating that supplies to SEZ units are to be treated as inter-state supplies and zero-rated when used for authorized operations.
• The applicant argued that they should be entitled to receive supplies from the Domestic Tariff Area (DTA) either under LUT or on payment under RCM as per section 16 of the IGST Act, 2017.
• They relied on several judicial precedents and circulars supporting their view that SEZ units should not be liable to pay GST under RCM for such services.

Findings by the Ruling Authority:

1.     Notification No. 10/2017 - Integrated Tax (Rate): The ruling authority reviewed Notification No. 10/2017 - Integrated Tax (Rate) dated 28.6.2017, which specifies the categories of supply of services that are to be taxed on a reverse charge basis by the recipient of such services.

2.     Relevance of SEZ Status: It was established that the applicant, being an SEZ unit, is eligible to procure services without payment of IGST, provided they furnish a Letter of Undertaking (LUT) or bond as specified in Notification No. 37/2017-CT. The authority referenced previous decisions and circulars that clarify the treatment of supplies to SEZ units as inter-state supplies eligible for zero-rating under Section 16 of the IGST Act, 2017.

3.     Applicant's Submission: The applicant argued that services received by an SEZ unit for authorized operations are zero-rated, and thus, they should not be required to pay GST under the reverse charge mechanism (RCM). The applicant also referred to various case laws and government circulars to support their stance.

4.     Authority's Conclusion: The authority concluded that the applicant, an SEZ unit, is not required to pay GST under RCM on specified services, in accordance with Notification No. 10/2017-Integrated Tax (Rate), subject to the condition of furnishing an LUT or bond as required.

Ruling:

1.     First Question: The applicant, an SEZ unit, is not required to pay GST under RCM on services received from an advocate as per Notification No. 10/2017-Integrated Tax (Rate) dated 28.6.2017, subject to furnishing an LUT or bond as specified.

2.     Second Question: In view of the answer to the first question, the second question is rendered infructuous.

This ruling provides clarity that SEZ units can receive services for authorized operations without the burden of reverse charge GST, provided they comply with the LUT or bond requirements .

 Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.