Circular No. 48/22/2018-GST [C10-1Q6]

Representations have been received seeking clarification on certain issues under the GST laws. The same have been examined and the clarifications on the same are as below:

Sl. Issue Clarification No.

1. Whether services of short-term 1.1 As per section 7(5) (b) of the Integrated accommodation, conferencing, Goods and Services Tax Act, 2017 (IGST banqueting etc. provided to a Special Act in short), the supply of goods or Economic Zone (SEZ) developer or a services or both to a SEZ developer or a SEZ unit should be treated as an inter- SEZ unit shall be treated to be a supply State supply (under section 7(5)(b) of of goods or services or both in the course of inter-State trade or commerce. the IGST Act, 2017) or an intra-State Whereas, as per section 12(3)(c) of the supply (under section 12(3)(c) of the IGST Act, the place of supply of services IGST Act, 2017)? by way of accommodation in any immovable property for organising any functions shall be the location at which the immovable property is located. Thus, in such cases, if the location of the supplier and the place of supply is in the same State/ Union territory, it would be

treated as an intra-State supply.

1.2 It is an established principle of interpretation of statutes that in case of an apparent conflict between two provisions, the specific provision shall prevail over the general provision.

1.3 In the instant case, section 7(5)(b) of the IGST Act is a specific provision relating to supplies of goods or services or both made to a SEZ developer or a SEZ unit, which states that such supplies shall be treated as inter-State supplies.

1.4 It is therefore, clarified that services of short term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an inter-State supply.

2. Whether the benefit of zero rated 2.1 As per section 16(1) of the IGST Act, supply can be allowed to all “zero rated supplies” means supplies of procurements by a SEZ developer or a goods or services or both to a SEZ SEZ unit such as event management developer or a SEZ unit. Whereas, services, hotel and accommodation section 16(3) of the IGST Act provides services, consumables etc? for refund to a registered person making zero rated supplies under bond/LUT or on payment of integrated tax, subject to such conditions, safeguards and procedure as may be prescribed. Further, as per the second proviso to rule 89(1) of the Central Goods and Services Tax Rules, 2017 (CGST Rules in short), in respect of supplies to a SEZ developer or a SEZ unit, the application for refund shall be filed by the:

(a) supplier of goods after such goods have been admitted in full in the SEZ for authorised operations, as endorsed by the specified officer of the Zone;

(b) supplier of services along with such evidences regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone.

2.2 A conjoint reading of the above legal provisions reveals that the supplies to a SEZ developer or a SEZ unit shall be zero rated and the supplier shall be eligible for refund of unutilized input tax credit or integrated tax paid, as the case

may be, only if such supplies have been received by the SEZ developer or SEZ unit for authorized operations. An endorsement to this effect shall have to be issued by the specified officer of the Zone.

2.3 Therefore, subject to the provisions of section 17(5) of the CGST Act, if event management services, hotel, accommodation services, consumables etc. are received by a SEZ developer or a SEZ unit for authorised operations, as endorsed by the specified officer of the Zone, the benefit of zero rated supply shall be available in such cases to the supplier.

3. Whether independent fabric 3.1 Notification No. 5/2017-Central Tax processors (job workers) in the textile (Rate) dated 28.06.2017 specifies the goods sector supplying job work services are in respect of which refund of unutilized input eligible for refund of unutilized input tax credit (ITC) on account of inverted duty tax credit on account of inverted duty structure under section 54(3) of the CGST structure under section 54(3) of the Act shall not be allowed where the credit has accumulated on account of rate of tax on CGST Act, 2017, even if the goods inputs being higher than the rate of tax on (fabrics) supplied are covered under output supplies of such goods. However, in notification No. 5/2017-Central Tax case of fabric processors, the output supply is (Rate) dated 28.06.2017? the supply of job work services and not of goods (fabrics).

3.2 Hence, it is clarified that the fabric processors shall be eligible for refund of unutilized ITC on account of inverted duty structure under section 54(3) of the CGST Act even if the goods (fabrics) supplied to them are covered under notification No. 5/2017-Central Tax (Rate) dated 28.06.2017.

2. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

3. Difficulty if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.