Security Service by Other than body corporate to SEZ

[KUMAR Narasimhan]

Security Service done by other than body corporate to SEZ unit.

SEZ unit has to pay the tax under RCM. Please confirm, am I right?

[Shilpi Jain]

The SEZ would not be liable to pay under RCM nor is the service provider required to pay. There is a department communication that SEZs are not liable under RCM. It is suggested that the service provider takes an LUT in order to safeguard against any demand from department.

[KUMAR Narasimhan]

Thank you for the clarification Mam

[KASTURI SETHI]

As per Section 16(1) (b) of IGST Act, supply of goods or services or both to SEZ unit or developer is zero rated supply. Such supply of service will be considered as exempted service.Hence no liability of tax on supplier of service. No question of shifting liability under RCM on SEZ unit.

However, FAQ updated till 15.12.18 (Q.no.41) says that recipient under RCM is considered as deemed supplier of service. So SEZ unit has to pay GST on such service.

FAQ has no statutory force.

[KUMAR Narasimhan]

Dear Sir,

On updating the SEZ sale in GSTR-1 table, "Supply attracts reverse charge field is getting disappeared" We are able to view only "With payment" or "Without Payment".

In this case how SEZ unit will pay the taxes through RCM?

[ABHISHEK TRIPATHI]

Agree with KS Sir.

Dear KS Sir,

In FAQ No. 41, any idea why they are calling SEZ a deemed supplier? Any legal backing for that?

[KASTURI SETHI]

Sh.Abhishek Tripathi Ji, Sir, I do not know more than you.

[Jayaram Hiregange]

Are the security services not covered under default list of services which are deemed to be utilized for authorized operations and hence no GST is payable under RCM

AI Summary

Zero-rated supply to SEZ units and reverse charge uncertainty may require safeguards like an LUT to mitigate GST risk.
Supply of services to an SEZ unit is treated as a zero-rated supply under Section 16(1)(b) of the IGST Act, so the supplier is not liable to tax; accordingly there is no basis to impose tax on the SEZ recipient under the reverse charge mechanism. However, a departmental FAQ treating the recipient as a "deemed supplier" and a departmental communication denying RCM liability for SEZs have created conflicting guidance, and practitioners recommend procuring an LUT while noting GSTR 1 reporting limitations affecting RCM selection.