TAXABILITY OF SUPPLIES TO URD SEZ ENTITY AND REPORTING IN GSTR-1

[SUDHIRKUMAR SHAH]

ONE IS COMPANY HAVING ITS OFFICE IN MUNDRA SEZ. COMPANY IS REGISTERED UNDER GST ACT.

ANOTHER IS TRUST HAVING SCHOLL IN MUNDRA SEZ, NOT REGISTERED IN SEZ.

NOW, COMPANY SUPPLIES SERVICE OF RENTING IMMOVABLE PROPERTY TO SCHOOL (PROPERTY IS IN SEZ).

WHETHER SUCH SUPPLY IS TAXABLE SUPPLY B2C OR ZERO RATED SUPPLY ? YES/NO WHY?

WHERE TO REPORT SUCH TRNSACTION IN GSTR-1 IF SAME IS TREATED AS ZERO RATED SUPPLY?

[YAGAY andSUN]

Following Ruling may be helpful to you.

Supply of Goods by Café Coffee Day to SEZ units will not be treated as Zero rated supply

[2018] 96 taxmann.com 247 (AAR-KARNATAKA)

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA

Supply of Goods by Café Coffee Day to SEZ units will not be treated as Zero rated supply

[2018] 96 taxmann.com 247 (AAR-KARNATAKA)

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA

Coffee Day Global Ltd., In re = 2018 (8) TMI 875 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA

[SUDHIRKUMAR SHAH]

IN THIS CASE SERVICE RECEIVED FOR THE AUTHORISED OPERATIONS ONLY AND BOTH THE UNIT ARE SITUATED IN SEZ.

ONE UNIT IS REGISTERED AND ANOTHER IS UNREGISTERED.

QUESTION IS TO

WHETHER SUPPLY OF SERVICE BY REGISTERED DEALER TO UNREGISTERED DEALER IS BECOME A TAXABLE SUPPLY ONLY BECUASE THE ENITY IS UNREGISTERD UNDER GST.... AS PER THE SEZ ACT SUPPLY OF GOODS OR PROVIDING SERVICE FROM ONE UNIT TO ANOTHER UNIT OR DEVELOPER IN THE SAME OR DIFFERENET SEZ IS A ZERO RATED SUPPLY ONLY...

AND REPORTING ISSUE IN GSTR-1. IF THE SAME IS TREATED AS ZERO RATE SUPPLY TO UNREGISTERED DEALER THEN IN WHICH TABLE OF GSTR-1 THE SAME IS TO BE REPORTED

[YAGAY andSUN]

Yes, it will become taxable services since being supplied to unregistered dealer.

[SUDHIRKUMAR SHAH]

Why it become taxable service ??

[KASTURI SETHI]

Dear Querist,

Pl. go through the following:-

Section 2 (o) (ii) of SEZ Act, 2005 “import” means-

(ii) receiving goods, or services by, Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone;

Exemption from IGST to services imported by a unit/developer in Special Economic Zone (SEZ) for authorised operators

In exercise of the powers conferred by sub-section (1) of section 6 of the Integrated Goods and Service Tax Act, 2017 (13 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do and on the recommendations of the Council, hereby exempts services imported by a unit or a developer in the Special Economic Zone for authorised operations, from the whole of the integrated tax leviable thereon under section 5 of the Integrated Goods and Service Tax Act, 2017 (13 of 2017).

[Notification No. 18/2017-Integrated Tax (Rate), dated 5-7-2017]

[KASTURI SETHI]

In continuation to my reply above the whole Section 2(O) of SEZ Act, 2005 should be read with Section 51 ibid.

51. Act to have overriding effect.

(1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

[SUDHIRKUMAR SHAH]

Respected Kasturi Sir,

Thanks for reply.

My another question on this matter is In GSTR-1 where the supplier will report .

Supplier is registered and service received is unregistered and both are SEZ unit.

[KASTURI SETHI]

In Table No.8 (meant for Nil rated, exempted and non-GST outward supplies) and against Serial No.8 C-Inter-State Supplies to unregistered persons of GSTR-1. Exempted is meant for your transaction in the light of notification No.18/17-I.T. given above.

Table no.6 is meant for supply to registered persons. Your service receiver is unregistered. So Table No.6 cannot be filled up as services are being supplied to unregistered person. In the very first column of Table no.6, it requires GSTIN of recipient.

[CA Seshukumar]

Hi all

In this query trust definitely would not have got SEZ LoA from BoA.

Company would have allowed to use one floor or building for school.

1. Trust will not be treated as SEZ though the property is in SEZ.

2. Company will have to charge IGST as per sec.7(5)(b) of IGST act.

3. It will be definitely not a zero rated supply.

4.for company if they want to buy any services to be rendered in relation to this school say painting or repairs then company can't get upfront exemption. As the same is not used for Authorised operations. As SEZ unit can't say renting is an authorized operation. Even assume that developer has given on rent in which case also developer can't give on rent to others.

If trust has got sez status then we can discuss.

[SUDHIRKUMAR SHAH]

Yes Sir, Trust has got the approved Co-developer in SEZ.

We have put up all the above discussed material before them.

Now they Come up with the contention that establishment is located in Non processing area of Mundra SEZ. As per SEZ Rules fiscal benifits for operation and maintanance activities for an establishment located in the Non Processing area are not permitted. In view of this they are saying that they will not issue zero rated invoice.

Now, Sirs, Kindly advise

What is non processing area in SEZ??

Is there any provisions in SEZ act that are restricting tax benefit to unit located in such area i.e. non processing area?

[CA Seshukumar]

In this scenario school is not SEZ and will be treated as other than SEZ .

Renting is taxable with IGST and trust can't take credit as it is not registered to take credit.

[SUDHIRKUMAR SHAH]

Kasturi Sir, Please advise.

AI Summary

Services in SEZ: Renting to Unregistered Trust Taxed with IGST, Not Zero-Rated. Report in Table 8 of GSTR-1. A discussion on the taxability of services provided by a registered company to an unregistered trust within a Special Economic Zone (SEZ) focused on whether the service is considered a taxable supply or zero-rated supply. The company rents immovable property to the trust, which is located in Mundra SEZ. The consensus was that the supply is taxable with Integrated Goods and Services Tax (IGST) since the trust is not registered under GST, and the transaction should be reported in Table 8 of GSTR-1. The trust, being in a non-processing area, does not qualify for zero-rated benefits.