SEZ unit's accommodation and food services to non-SEZ visitors liable to GST under Section 16 IGST Act

AAAR Gujarat ruled that accommodation and food services provided by SEZ unit to visitors not located in SEZ are liable to GST. The Authority held that Section 16 of IGST Act, 2017 provides zero-rated supply status only for supplies "to" SEZ developer/unit, not supplies "by" them. The deeming fiction under Section 53 of SEZ Act, 2005 treating SEZ as territory outside customs territory applies only for authorized operations and cannot exempt all SEZ activities from GST. The Authority rejected arguments that SEZ activities are automatically exempt from IGST, clarifying that only specific supplies to SEZ units qualify for zero-rating while other supplies remain taxable under IGST provisions.

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Issues:
1. Liability of 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.
2. Applicability of IGST on services provided by the hotel to visitors outside the SEZ.

Analysis:
1. The Gujarat Authority for Advance Ruling (GAAR) ruled that services provided by the hotel to clients within the SEZ are zero-rated supplies under the IGST Act, 2017. However, services provided to clients outside the SEZ are liable to GST under Section 5(1) of the IGST Act, 2017.

2. The appellant appealed against the ruling specifically concerning services provided to visitors outside the SEZ. The appellant acknowledged no objection to the ruling on services within the SEZ but contested the ruling on services outside the SEZ.

3. The delay in filing the appeal was condoned due to genuine confusion regarding the correct authority for filing. The appellant's argument emphasized the destination principle of GST, stating that as services were provided within the SEZ, no IGST should apply. However, the tribunal clarified that the supply to visitors outside the SEZ is liable to IGST.

4. The appellant cited Section 53 and 51 of the SEZ Act, 2005, arguing that services provided within the SEZ should not be subject to IGST. The tribunal disagreed, stating that the SEZ Act does not exempt services from IGST unless specifically provided for.

5. The appellant referenced an Advance Ruling from Kerala and a Customs Circular, which were deemed irrelevant to the current case as they addressed different issues. The tribunal found no applicability of these references to the present matter.

6. Further, the appellant relied on Section 53(2) of the SEZ Act, 2005 and specific Circulars to support their argument against IGST. The tribunal clarified that the provisions cited were not applicable to the services provided by the appellant in the SEZ.

7. Ultimately, the tribunal upheld the GAAR ruling, confirming the liability of the appellant to pay GST on services provided to visitors outside the SEZ. The appeal by M/s. Sapthagiri Hospitality Private Limited was rejected based on the detailed analysis and interpretation of relevant legal provisions.

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