SEZ unit is not liable to pay GST under reverse charge: Authority for Advance Ruling

Mumbai, May 28, 2024

The Authority for Advance Ruling, Gujarat, has held that that a unit in a Special Economic Zone (SEZ) is not liable to pay Goods and Services Tax (GST) under the Reverse Charge Mechanism (RCM) for the services received from Domestic Tariff Area (DTA) such as services of an advocate, provided it furnishes a Letter of Undertaking. This ruling was given in respect of an application sought by Waaree Energies Limited.

In addition to various notifications, the AAR bench also relied on a clarification given by the CBIC on a similar issue to a SEZ unit in IFSC-Gandhinagar, which stated that a SEZ unit can procure RCM services without payment of tax if it furnishes a letter of undertaking.The Appellate Authority for Advance Rulings, Maharashtra, in the case of Portescap, a private limited company, had also held likewise.

While advance rulings do not set a judicial precedent, they do have a persuasive effect during assessments. This ruling could support SEZ units in India, who are facing litigation on this issue.

[The Times of India]