(MENAFN- KNN India) Ahmedabad, Apr 24 (KNN)
A recent ruling in Gujarat could pave the way for units operating in Special Economic Zones (SEZs) to be exempt from paying Integrated Goods and Services Tax (IGST) on specified services procured from the Domestic Tariff Area (DTA).
This exemption hinges on these units furnishing a Letter of Undertaking (LUT) or a bond, as ruled by Gujarat-based Authority for Advance Rulings (AAR).
The services covered include transport, legal, security and employee transportation from domestic service providers.
Typically, the recipient pays GST under the reverse charge mechanism on such services. However, an advance ruling on a case involving Waaree Energies Ltd, a solar module manufacturer in Surat SEZ, has allowed it to avoid the IGST levy by submitting the required undertaking.
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This ruling aligns with a 2018 government clarification allowing SEZs to procure services under reverse charge without IGST, provided they furnish a Letter of Undertaking. While this clarification was for a specific entity, the Gujarat authority saw no bar in extending the rationale to other SEZ units.
Tax experts herald this as a pivotal decision supporting the zero-rated intent for SEZs under GST. "It eases compliance burden and fosters a more conducive environment for growth and SEZ investments," noted Sandeep Sehgal, Partner at AKM Global.
If upheld, this ruling could open doors for SEZ units across India to secure tax relief on key services from the domestic tariff area. However, procedural safeguards like Letters of Undertaking would apply to prevent misuse. The tax administration will closely monitor the precedent's implementation and impact on revenue.
(KNN Bureau)
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