No GST payable under RCM on Procurement of Renting of Immovable Property Services from SEZs

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The Appellate Authority for Advance Ruling (AAAR) Maharastra, has ruled that Goods and Service Tax shall not be payable under Reverse Charge Mechanism on procurement of renting of immovable property services from Special Economic Zones (SEZ).

In an application for Advance Ruling filed by the appellant, M/s Portescap India Private Limited who is a private limited company incorporated in India, who were inter alia engaged in manufacturing of customised motors in India. 

As the Appellant was an SEZ Unit, it was engaged in exports of the manufactured goods outside India. 

The Appellant procures Rental Services from “Santacruz Electronics Export Processing Zone(SEEPZ) wherein GST was presently being discharged by the Appellant under the Reverse Charge Mechanism.

The appellant sought advance ruling as to 

1. Whether an SEZ unit is required to comply with the reverse charge mechanism as a service recipient for local domestic renting of immovable property services procured by the unit from SEEPZ Special Economic Zone Authority ? 

2. Whether an SEZ unit is required to pay tax under reverse charge mechanism on any other services ?

The  Appellant contended that in order to implement the Notification No. 10/2017 I.T. (R) dated 28.06.2017, the SEEPZ SEZ, which is also a SEZ developer, has to be construed as a local authority as per the provisions of section 2(69) of the CGST Act 2017. 

As such, the transaction under consideration, i.e., renting of immovable property, would turn out to be between DTA and a SEZ unit, and hence, they would be in position to avail the benefit of LUT as per the SEZ (Amendment) Rules, 2018, and accordingly, they would not be required to pay any GST on the receipt of impugned services.  

On behalf of the revenue it was submitted that all the conditions laid down under Notification No. 03/2018- C.T. (R) dated 25.01.2018, and the Notification No. 03/2018-1.T. (R) dated 25.01.2018 are squarely satisfied, that the appellant, being registered under the CGST Act, 2017, were liable to pay GST under RCM on the impugned transaction, i.e., supply of services of renting of immovable property by SEZ authority to them. 

The AAAR bench set aside the ruling of MAAR and held that that the Appellant were not required to pay GST under RCM on the impugned services of renting of immovable property services received from SEEPZ SEZ for carrying out the authorised operation in SEZ subject to furnishing of LUT or bond as a deemed supplier of such services and  that the Appellant were not required to pay GST under RCM on any other services received from the suppliers located in DTA for carrying out the authorised operation in SEZ subject to furnishing of LUT or bond as a deemed supplier of such services. 

Well......

A very important decision having only persuasive value.


SRIVATSAN.R.

Chennai

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