Whether supply of non-alcoholic beverages to SEZ units is in the nature of zero rated supply?

PJ/Case Law/2018-2019/3504

Case: M/s Coffee Day Global Limited (GST AAR Karnataka)
Citation: Advance Ruling No. KAR ADRG 13/2018 Dated 26.07.2018
Issue: Whether supply of non-alcoholic beverages to SEZ units is in the nature of zero rated supply?
Brief Facts: M/s Coffee Day Global Limited has filed an application for seeking advance ruling on the supply of non-alcoholic beverages to SEZ units using coffee vending machines. The applicant installs beverage vending machine inside SEZ premises, prepare the beverages using these machines and charge the SEZ units based on number of cups of beverages supplied. Employees will not be any consideration for the usage of vending machine by the SEZ units.
Applicant’s Contention: The Applicant contends that all supplies to SEZ, without any distinction, have been declared to be zero-rated supplies by Section 16 of the IGST Act’ 2017. Rule 89 of CGST Rules 2017 dealing with refund of input tax credits relating to SEZ supplies speak of inputs being used for authorized operations. The applicants’ contention is that any supply of goods or services to SEZ units is zero-rated and interprets that the phrase ‘any supply’ would cover everything, including beverages and ingredients for beverages.
Respondent’s Contention and reasoning of Judgment: The applicant has used the term ‘any supply’ in his contention. The authority is of the view that this term is not used anywhere in the statute. The word ‘any’ has been used only once in Section 16(1) of IGST Act, 2017. It reads `(1) “zero-rated supply” means any of the following supplies of goods or services or both, namely:- …’. The word any has not been placed at the beginning of the sentence in (b) to read ‘any supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone Unit’.
Therefore the interpretation of the applicant is not correct.
In this regard we consider it relevant to dwell in the provisions of Rule 89 of the CGST Rules, 2017. The proviso of the Rule 89 prescribes that refund in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer shall be admitted in full in case the SEZ is engaged in authorized operations.
The operations to be carried out in the Special Economic Zone and also in the Units located therein have to be in accordance with the authorization to be given by the Central Government, in terms of Section 4(2) of the SEZ Act, 2005. Further Section 15(9) of the said Act further requires that the SEZ Unit shall carry out only the authorized operations in the Unit. It thus flows that any special benefit accruing to the Units located in the SEZ shall be strictly in respect of the authorized operations only. The activity undertaken by them is certified as authorized operations by the proper officer of the SEZ.
Decision: The supply of non-alcoholic beverages / ingredients to such beverages, to SEZ units using coffee vending machines by the applicant, do not qualify as zero rated supply, as defined under Section 16 of the IGST Act’2017.
Comment: Circular No. 48/22/2018-GST Dated 14th June 2018 provides that if event management services, hotel and accommodation services, consumables etc are received by a SEZ unit for authorized operations, as endorsed by the specified officer of the Zone, the benefit of zero rated supply shall be available in such cases to the supplier. Therefore, this ruling defeats the clarification given by the above circular.
Prepared by- Mohammed Kasif

Comments

PJ/Case Law/2018-2019/3504

Post a Comment

Query