Facts: M/s. Sapthagiri Hospitality Private Limited are in the possession of Letter of Permission issued by the Ministry of Commerce & Industry, New Delhi in favour of them as a Co-Developer for providing infrastructure facilities to establish a Hospitality Project in non-processing zone of Dahez SEZ. Accordingly, the Applicant constructed a hotel in the non-processing zone of Dahez SEZ on the land allotted to it and started hospitality services therein. The hospitality services provided by them inter-alia includes providing rooms on tariff, supplying food/beverages, laundry services, housekeeping services etc within the premises of the hotel.
The Applicant submitted that considering the provisions of Section 16(1)(b) of the IGST Act, 2017 (“IGST Act”) the company running a hotel in SEZ should not be made liable to pay GST considering the services provided by it as ‘zero rated supply’. They further submitted that as place of supply in terms of Section 12 of IGST Act shall be the location of the hotel itself i.e. SEZ, to their belief and understanding, there shall not be the requirement to pay GST either on the services provided to clients located in SEZ or a visitor coming from a territory outside SEZ as place of supply as well as the location of supplier providing the said services is within SEZ only.
Issues involved:
1. Whether GST is liable to be paid on the accommodation and food & beverages services provided by a hotel located in non-processing zone of Dahez SEZ to the clients located in SEZ?
2. Under extreme circumstances, if the hotel is required to provide accommodation services to a visitor other than a visitor located in SEZ, whether GST is required to be paid?
Held: The Hon’ble AAR of Gujarat vide Advance Ruling No. GUJ/GAAR/RULING/2018/14 dated July 30, 2018 held as follows:
1. As per Section 16(1) of the IGST Act ‘zero rated supply’ means any of the following supply of goods or services or both namely (a) export of goods or services or both ; or (b) supply of goods or services or both to a SEZ developer or SEZ Unit. Further, Section 2(m)(iii) of the SEZ Act, 2005 defines export means supplying goods, or providing services, from one unit to another unit or developer, in the same or different SEZ.
A combined reading of Section 16(1) of IGST Act and Section 2(m)(iii) of SEZ Act indicate that supply of services made by the applicant, a SEZ Co-developer, from their hotel located in non- processing zone of Dahez SEZ to the clients located in SEZ (i.e. other units or developers of SEZ) for authorized operations will be treated as zero-rated supplies.
2. Rendering of services from SEZ to DTA does not qualify as zero rated supply in terms of Section 16 of the IGST Act. Therefore, the applicant is liable to pay GST on the services from their hotel located in non-processing zone of Dahez SEZ to the clients located outside the territory of SEZ under the provisions of Section 5(1) of the IGST Act, if the hotel is required to provide accommodation services to a visitor other than a visitor located in SEZ.
Citation: [TS-522-AAR-2018-NT]