Services Provide by a Hotel outside SEZ to the Employees and Guests of SEZ Units subject to GST: AAR [Read Order]

The Authority for Advance Ruling, (AAR) Karnataka, has held that the hotel accommodation & restaurant services provided, within the premises of the Hotel located outside Special Economic Zone (SPZ), to the employees & guests of SEZ units could not be treated as supply of goods & services to SEZ units and hence, are taxable under GST.

The applicant, M/s. Gogte Infrastructure Development Corporation Limited is engaged in the hotel business and provides hotel accommodation & restaurant services to the regular customers as well as to the employees & guests of some of the SEZ units in Belgravia. They are charging SGST & CGST at the applicable rate. The Hotel is located outside the SEZ. They are not giving any concessional rate to the bills of the SEZ. However, the SEZ units contended for concession and gave a letter to the Hotel to provide billing in their name whenever any of their guest/ employees use the services/facilities.

The applicant has sought a ruling from the Authority for Advance Rulings (AAR) regarding whether the hotel accommodation & restaurant services provided by them, within the premises of the Hotel, to the employees & guests of SEZ units, be treated as the supply of goods & services to SEZ units in Karnataka or not.

The Authority comprising of Members Harish Dharnia & Dr, Ravi Prasad M.P. noted that Section 16(1)(b) of the Integrated Goods and Services Tax (IGST) Act, 2017 read with Rule 46 of the Central Goods and Services Tax (CGST) Rules 2017 states that the supplies of goods or services or both towards the authorised operations only shall be treated as Supplies to SEZ Developer/ SEZ Unit. Further, they observed that the place of supply of the service by way of lodging accommodation by a hotel should be the location at which the immovable property is located or intended to be located, as per section 12 (3)(b) of the IGST, 2017.  They also observed that the place of supply of restaurant and catering services should be the location where such services are actually performed as per Section 12(4) of the IGST, 2017.

“In the instant case, admittedly, 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” read the Order.