AAR on applicability of GST on supplies to SEZ unit

AAR on taxability of supplies to units in SEZs

Advance Ruling No: 14/WBAAR/2018-19 dated 01/08/2018

• Facts of the case:
  • The Applicant is dealer of Cummins India Limited, who is in the business of diesel engines and its spare parts along with services of diesel engine.
  • The supply made by the applicant is generally based on AMC basis or on demand basis to various companies all Special Economic Zone (SEZ) unit.

• Questions raised before the AAR:
  • Whether or not the supply of goods and on-site services to customers in SEZ area to any SEZ unit or SEZ developer is zero rated supply under section 16 of the Integrated Goods & Services Tax Act, 2017? 
  • Whether GST is chargeable for the supply of goods or services to SEZ unit or SEZ developer?

• Observations / Rulings made by the AAR:
  • At first the AAR observed that although the questions raised in the Application touch upon certain provisions of the IGST Act and supplies to SEZ units or SEZ developers are inter-state supplies under section 5 (b) of the IGST Act, the Applicant ultimately wants to know whether he is liable to pay tax on his supplies.
  • Further the AAR have gone through section 16 of IGST Act which deals with “zero rated supply” which also includes the supply of goods and services or both to SEZ unit or SEZ developers , the relevant extract of which is reproduced hereunder:
  • “(1) “zero rated supply” means any of the following supplies 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 Special Economic Zone developer or a Special Economic Zone unit”

• • The AAR observed that the supply made by the Applicant falls under section 16 and accordingly provisions related to the same shall be applicable.
  • As per section 16(3), the person making “zero rated supply” can either make supply without paying tax, or may supply on payment of tax and claim refund subsequently.
  • Therefore AAR ruled that applicant may supply without paying tax in terms of Section 16(3)(a) or may supply on payment of tax and claim refund subsequently u/s 16(3)(b) of IGST Act.

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