SEZ Co-developer's hotel services in SEZ: Zero-rated for in-zone clients, taxed for out-of-zone.

The Authority for Advance Ruling determined that services provided by a SEZ Co-developer's hotel in a non-processing zone of a Special Economic Zone (SEZ) to clients within the SEZ are considered zero-rated supplies, exempt from GST. However, services to clients outside the SEZ attract GST liability. This distinction ensures compliance with GST regulations, clarifying the tax treatment for services within and outside the SEZ.

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Issues:
1. Liability to pay GST on services provided by a hotel in a non-processing zone of a Special Economic Zone (SEZ) to clients within and outside the SEZ.

Analysis:
The applicant, a SEZ Co-developer, sought an advance ruling regarding the liability to pay GST on services provided by their hotel in a non-processing zone of a SEZ to clients within and outside the SEZ. The applicant contended that as per Section 16(1)(b) of the IGST Act, services provided by a company running a hotel in an SEZ should be considered 'zero rated supply,' exempting them from GST liability. They argued that the place of supply, being the location of the hotel within the SEZ, should not attract GST. The applicant raised specific questions regarding the liability to pay GST on accommodation services, food and beverages, and ancillary services provided within the SEZ and to visitors from outside the SEZ.

Upon hearing the submissions and reviewing the relevant provisions, the Authority for Advance Ruling analyzed the definitions under the IGST Act, 2017 and the SEZ Act, 2005. They highlighted that supplies made by the applicant to other units or developers within the SEZ would indeed qualify as zero-rated supplies. However, the ruling clarified that services provided from the SEZ to the Domestic Tariff Area (DTA) do not fall under zero-rated supplies, making the SEZ unit or developer liable to pay IGST for interstate supplies to the DTA. Consequently, the applicant was deemed liable to pay GST at the prescribed rates for services provided to clients located outside the SEZ.

In conclusion, the ruling specified that services offered by the applicant to clients within the SEZ for authorized operations would be treated as zero-rated supplies under the IGST Act, while services provided to clients outside the SEZ would attract GST liability under the provisions of the IGST Act, 2017. The judgment provided clarity on the distinction between zero-rated supplies within the SEZ and taxable supplies to clients outside the SEZ, ensuring compliance with the relevant GST regulations in the context of SEZ operations.

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