2018 (5) TMI 759 - AAR - GST

Hotel services for SEZ units not considered supply; intra-state tax applies.

The Authority ruled that the hotel accommodation and restaurant services provided by the applicant to the employees and guests of SEZ units cannot be ... Supply to Special Economic Zone (SEZ) unit or developer treated as zero rated supply - Supply meant for export / Supply to SEZ unit or SEZ Developer for authorised operations - Invoice endorsement under Rule 46 for supplies to SEZ - Place of supply of services by way of lodging accommodation - Place of supply of restaurant and catering servicesSupply to Special Economic Zone (SEZ) unit or developer treated as zero rated supply - Supply meant for export / Supply to SEZ unit or SEZ Developer for authorised operations - Place of supply of services by way of lodging accommodation - Place of supply of restaurant and catering services - Invoice endorsement under Rule 46 for supplies to SEZ - Whether hotel accommodation and restaurant services provided by the applicant to employees and guests of SEZ units are to be treated as supplies to SEZ units (zero rated) or as intra state taxable supplies. - HELD THAT: - The Authority examined Section 16(1)(b) of the IGST Act which treats supplies to an SEZ developer or unit as zero rated only when made towards authorised operations, and Rule 46 of the CGST Rules which requires specific invoice endorsements for supplies to SEZ. The statutory place of supply rules were applied: for lodging accommodation the place of supply is the location of the immovable property (hotel) and for restaurant/catering services it is the location where the services are performed. The applicant's hotel is located outside the SEZ and the services are neither rendered within the SEZ nor in furtherance of authorised operations of the SEZ unit/developer. Consequently the supplies cannot be characterised as supplies to the SEZ unit/developer under the zero rating provision and the required Rule 46 endorsements are not applicable. On these findings the Authority held the supplies to be intra state and taxable accordingly. [Paras 7, 8, 9, 10]Hotel accommodation and restaurant services provided by the applicant to employees and guests of SEZ units are not supplies to SEZ units for the purpose of zero rating; they are intra state supplies and taxable accordingly.Final Conclusion: The Advance Ruling holds that the hotel accommodation and restaurant services rendered outside the SEZ to employees and guests of SEZ units do not qualify as supplies to SEZ units for zero rating and are intra state taxable supplies. Issues:1. Whether hotel accommodation and restaurant services provided within the premises of the hotel to the employees and guests of SEZ units should be treated as supply of goods and services to SEZ units in Karnataka.Analysis:The applicant, a company engaged in the hotel business, filed an application for advance ruling seeking clarification on the tax treatment of services provided to employees and guests of SEZ units. The SEZ units contended that the services should be treated as supply to SEZ units, hence attracting a NIL rate of GST. The applicant argued that they are not part of the SEZ, bill SEZ companies for services, and have not entered into any contracts with the SEZ units.During the personal hearing, the authorized representative reiterated the company's position and stated that the services provided are not part of authorized SEZ operations. The Authority considered the submissions and relevant provisions of the CGST Act and IGST Act. They noted that supplies to SEZ units are zero-rated under Section 16(1)(b) of the IGST Act and Rule 46 of the CGST Rules, provided they are for authorized operations.The Authority analyzed the place of supply rules under the IGST Act, which determine the taxability of services based on the location of the immovable property or where the services are performed. Since the applicant's hotel is located outside the SEZ and the services are not part of authorized SEZ operations, they concluded that the supply is an intra-state supply and taxable accordingly.Therefore, the Authority ruled that the hotel accommodation and restaurant services provided by the applicant to the employees and guests of SEZ units cannot be treated as supply to SEZ units in Karnataka. Instead, they are considered intra-state supplies and subject to taxation as such.