Accommodation services by hotels to SEZ
There are some services which provided by restaurants and hotels to SEZ developers or units, these services which provided by the hotels or restaurants will not be treated as ‘zero-rated’ supplies, and these services will be taxable under the Goods And Service Tax (GST ) regime, and this is said by the Advance Ruling (AAR).
The Karnataka bench of the AAR, before the filed application of the applicant, asked one question to the applicant that, the services which are provided to him/her by the hotel or restaurant is it comes under the hotel’s premises or the applicant treated as the guest if it is treated as a guest then it will be treated as supply of goods and services.
"The hotel accommodation and restaurant services being provided by the applicant, within the premises of the hotel, to the employees and guests of SEZ units, cannot be treated as supply of goods and services to SEZ units in Karnataka and hence they are the intra-state supply and are taxable accordingly," the AAR order said.
Before this, the law states that the services which come under the “Authorised Operation” and in the authorized operation come to some example like-machinery, contractor, etc., that services will be treated as zero-rated supply to the SEZ. "
According to the Experts, the law does not consider which goods and services will become under the “authorized operation” and this is created confusion among the person about their taxability.
According to Section 16 of the Integrated GST (IGST) Act, both supply of goods and services and special economic zone (SEZ), developer or unit are considered as ‘zero-rated supply’
Although, according to Section 12 of the IGST Act, states that the ‘Place of Services’ is actually performed is which place, not on a location where lodging accommodation by a hotel or restaurant and catering services.
"In the instant case, the applicant is located outside the SEZ. Therefore, the services rendered by the applicant are neither the part of authorized operations nor consumed inside the SEZ," the AAR said.
As the rendition of services of restaurant, the accommodation, which is short-term and banqueting or conferencing cannot be said to have been 'imported or procured' into SEZ unit or developer, and therefore, this is treated as intra-state supply. Supplies made for 'authorized operations' shall only be treated as supplies to the SEZ developer/SEZ unit and would be zero-rated.
"Thereby every supplier to SEZ unit/ SEZ developer needs to check the taxability of the transactions that are aimed at other than authorized operations even though consumption is taking place in SEZ. Service providers to SEZ, especially the hospitality industry, might get a tax demand with effect from July 2017, wherein the supplies were made to SEZ,"