Hotels accommodating SEZ employees is inter-state in nature: CBIC

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Moneycontrol News

The Central Board of Indirect taxes and Customs (CBIC) has declared that services of short-term accommodation, conferencing, banqueting, etc, provided to a Special Economic Zone (SEZ) developer or a SEZ unit will be treated as an inter-State supply, eventually attracting zero GST.

CBIC also stated that the benefits of zero rated supply will be available to the supplier where SEZ unit receives event management services, hotel, accommodation services, consumables etc.

There was a controversy recently when AAR pronounced by Karnataka Advance Ruling Authority (ARA) held that accommodation and restaurant services provided within premises of a hotel, to employees and guests of SEZ units cannot be treated as inter-state supply of goods and / or services chargeable to Nil GST.

According to a report by The Economic Times, AAR claimed that supplies of goods and / or services towards authorised operations may possibly be treated as supplies to SEZ Developer / unit.

The AAR further added that as per Section 12(4) of IGST Act, the place of supply in case of restaurant and catering services is the location where services are actually performed. Whereas, as per Section 12(3)(b) of IGST Act, the place of supply of services by way of lodging, accommodation by a hotel, would be location of immovable property, which is a hotel. 

The services rendered in this particular case are neither part of authorised operations nor consumed inside SEZ. The reason being the applicant in this case is located outside the SEZ.

The ruling stated that rendition of services of restaurant, short-term accommodation and banqueting / conferencing cannot be said to have been ‘imported or procured’ into SEZ unit which meant such services constitute ‘intra-State’ supplies and are taxable accordingly.