Zero-rated supply to SEZ units prevails over reverse charge for authorised operations when the prescribed undertaking or bond is furnished.

Supplies of services to an SEZ unit for authorised operations are treated as zero-rated under the IGST Act, and that statutory treatment prevails over the reverse charge notification. Renting of immovable property services received from the SEZ Authority for authorised operations was therefore not liable to GST under reverse charge, and the same principle applied to other services procured from DTA suppliers for authorised operations in the SEZ. The benefit was conditional on furnishing the prescribed letter of undertaking or bond, after which reverse charge did not apply.

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Issues: (i) Whether renting of immovable property services supplied by the SEZ Authority to the SEZ unit is a zero-rated supply under the Integrated Goods and Services Tax Act, 2017 and, therefore, not taxable under reverse charge; (ii) Whether other services procured by the SEZ unit from DTA suppliers for authorised operations in the SEZ are liable to GST under reverse charge.

Issue (i): Whether renting of immovable property services supplied by the SEZ Authority to the SEZ unit is a zero-rated supply under the Integrated Goods and Services Tax Act, 2017 and, therefore, not taxable under reverse charge.

Analysis: Section 16(1)(b) of the Integrated Goods and Services Tax Act, 2017 treats supply of goods or services or both to a Special Economic Zone developer or unit as zero-rated supply. The provision does not confine the benefit to supplies made only by DTA suppliers. The reverse charge notification is subordinate to the statutory zero-rating provision and cannot override it. Where the supply is for authorised operations and the recipient furnishes a letter of undertaking or bond, the transaction is to be treated as zero-rated and not subjected to tax under reverse charge.

Conclusion: The issue is answered in favour of the assessee. Renting of immovable property services received from the SEZ Authority for authorised operations are not liable to GST under reverse charge, subject to furnishing of a letter of undertaking or bond.

Issue (ii): Whether other services procured by the SEZ unit from DTA suppliers for authorised operations in the SEZ are liable to GST under reverse charge.

Analysis: The same statutory scheme governing zero-rated supplies to SEZ units applies equally to other services procured from DTA suppliers for authorised operations. Once the supply falls within section 16(1) of the Integrated Goods and Services Tax Act, 2017, the recipient in SEZ is entitled to the zero-rated treatment, and the reverse charge mechanism does not alter that position where the recipient furnishes a letter of undertaking or bond.

Conclusion: The issue is answered in favour of the assessee. Other services received from DTA suppliers for authorised operations in the SEZ are also not liable to GST under reverse charge, subject to furnishing of a letter of undertaking or bond.

Final Conclusion: The impugned advance ruling was set aside and the SEZ unit was held entitled to zero-rated treatment for the relevant services used for authorised operations, with no GST payable under reverse charge upon compliance with the prescribed undertaking or bond requirement.

Ratio Decidendi: A statutory provision granting zero-rated treatment to supplies made to SEZ units for authorised operations prevails over a reverse charge notification, and such supplies are not taxable under reverse charge when the recipient furnishes the prescribed letter of undertaking or bond.

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