Summary of Advance Ruling by Gujarat Authority for Advance Ruling on GST

M/s Abans Alternative Fund Manager LLP Vs. Authority For Advance Ruling: Gujarat (Order Number: GUJ/GAAR/R/2024/08, Order Date: 16/04/2024)

Whether a SEZ Unit is required to pay tax under reverse charge mechanism on services received from advocate

M/s Abans Alternative Fund Manager LLP

Applicant:

  • M/s Abans Alternative Fund Manager LLP-IFSC
  • Order Number: GUJ/GAAR/R/2024/08,
  • Order Date: 16/04/2024
  • GSTIN: 24ABOFA6693E1Z7
  • Location: Unit No. 1108A, Block 13B, Zone 1, Gift SEZ, Gandhinagar – 382 355

Key Issues:

  1. Tax Liability under RCM: Whether the applicant, an SEZ unit, is required to pay tax under the Reverse Charge Mechanism (RCM) on services received from an advocate as per Notification No. 10/2017-Integrated Tax Rate (as amended).

Facts:

  • The applicant provides services related to holding securities and other assets for trusts and funds.
  • They have received services from an advocate for executing a lease agreement in the SEZ area.

Applicant’s Arguments:

  1. Zero-Rated Supply: Services provided to an SEZ for authorized operations are considered zero-rated supplies as per sections 7(5) and 16 of the IGST Act, 2017.
  2. Exemption Clauses: As per Rule 5(5)(a) of the SEZ Rules, 2006, SEZ units are exempt from state GST.
  3. Notification and Circulars:
    • Notification No. 18/2017-IT (Rate) exempts services imported by an SEZ unit for authorized operations.
    • Circular No. 48/22/2018-GST clarifies treating supplies to SEZ units as interstate supplies.
  4. Letter of Undertaking (LUT): SEZ units can procure services without paying IGST if they furnish an LUT as specified in Notification No. 37/2017-CT.
  5. Reverse Charge Notification: The applicant argues that the RCM notifications do not apply to SEZ units due to the overriding effect of the SEZ Act over other laws, including taxation laws.

Authority’s Findings:

  1. Notification No. 10/2017-Integrated Tax (Rate):
    • Under this notification, GST on services provided by an individual advocate to any business entity located in the taxable territory must be paid on a reverse charge basis by the recipient.
  2. SEZ Act Provisions:
    • Section 16 of the IGST Act provides for zero-rated supply for services provided to an SEZ.
    • Notification No. 37/2017-CT allows SEZ units to procure services without payment of IGST by furnishing an LUT.
  3. Clarifications and Rulings:
    • The CBIC has clarified that SEZ units or developers can procure services without payment of IGST under RCM by furnishing an LUT.
    • Past rulings and clarifications, such as in the case of M/s Potescap India Pvt Ltd, support this interpretation.

Ruling:

  1. No GST Under RCM: The applicant, an SEZ unit, is not required to pay GST under the Reverse Charge Mechanism on specified services (including legal services from an advocate) as per Notification No. 10/2017-IT (Rate), subject to furnishing an LUT or bond.
  2. Second Question: Rendered infructuous in light of the ruling on the first question.

Conclusion:

The applicant, M/s Abans Alternative Fund Manager LLP-IFSC, is not required to pay GST under RCM for services received from an advocate, provided they furnish an LUT or bond as specified under relevant GST provisions.