+
Gujarat AAR: SEZs May Dodge IGST on Specified Services
ECONOMY & POLICY

Gujarat AAR: SEZs May Dodge IGST on Specified Services

In a significant development, the Gujarat-based Authority for Advance Rulings (AAR) has delivered a ruling that might offer relief to units operating within special economic zones (SEZs) from paying the integrated goods and services tax (IGST) on specific services procured from the domestic tariff area (DTA) under the reverse charge mechanism.

The ruling, which sets a potential precedent, states that SEZ units could potentially sidestep the IGST obligation on designated services if they furnish a letter of undertaking (LUT) or a bond as specified by the government.

This decision comes in the wake of a case involving Waaree Energies Ltd, a Surat-based SEZ unit engaged in solar module manufacturing, which sought clarification on the procurement of services.

Under normal circumstances, service providers are liable to pay Goods and Services Tax (GST) to the government. However, under the reverse charge mechanism, it is the recipient of services who bears this responsibility.

The AAR ruling addresses a longstanding ambiguity highlighted by the Tax Research Unit (TRU) at the Central Board of Indirect Taxes and Customs (CBIC). While a clarification by the TRU previously indicated that SEZ units can avail services subject to GST under the reverse charge mechanism without IGST payment upon furnishing an LUT, the AAR ruling now substantiates this stance.

Sandeep Sehgal, a partner at tax and consulting firm AKM Global, emphasized the significance of this ruling for SEZ-based businesses. "It aligns with the zero-rated intent of the GST Act as clarified by the TRU, allowing SEZ units to source services without the burden of Reverse Charge Mechanism (RCM)," he stated. "This ruling not only eases compliance for SEZ-based businesses but also fosters a more conducive environment for growth and investment in SEZs."

With this ruling potentially setting a precedent, it could pave the way for smoother operations and reduced tax liabilities for businesses within SEZs, further bolstering India's economic landscape.        

In a significant development, the Gujarat-based Authority for Advance Rulings (AAR) has delivered a ruling that might offer relief to units operating within special economic zones (SEZs) from paying the integrated goods and services tax (IGST) on specific services procured from the domestic tariff area (DTA) under the reverse charge mechanism.The ruling, which sets a potential precedent, states that SEZ units could potentially sidestep the IGST obligation on designated services if they furnish a letter of undertaking (LUT) or a bond as specified by the government.This decision comes in the wake of a case involving Waaree Energies Ltd, a Surat-based SEZ unit engaged in solar module manufacturing, which sought clarification on the procurement of services.Under normal circumstances, service providers are liable to pay Goods and Services Tax (GST) to the government. However, under the reverse charge mechanism, it is the recipient of services who bears this responsibility.The AAR ruling addresses a longstanding ambiguity highlighted by the Tax Research Unit (TRU) at the Central Board of Indirect Taxes and Customs (CBIC). While a clarification by the TRU previously indicated that SEZ units can avail services subject to GST under the reverse charge mechanism without IGST payment upon furnishing an LUT, the AAR ruling now substantiates this stance.Sandeep Sehgal, a partner at tax and consulting firm AKM Global, emphasized the significance of this ruling for SEZ-based businesses. It aligns with the zero-rated intent of the GST Act as clarified by the TRU, allowing SEZ units to source services without the burden of Reverse Charge Mechanism (RCM), he stated. This ruling not only eases compliance for SEZ-based businesses but also fosters a more conducive environment for growth and investment in SEZs.With this ruling potentially setting a precedent, it could pave the way for smoother operations and reduced tax liabilities for businesses within SEZs, further bolstering India's economic landscape.        

Next Story
Building Material

Viva ACP Launches Experience Centre in Nashik

Viva ACP, one of Asia’s leading manufacturers of Metal Composite Panels (MCP), has unveiled a new state-of-the-art Experience Centre in Nashik. Situated at Plot No. 10, Kathe Industrial Estate, Tigrania Road, Dwarka, the centre aims to make Viva’s premium cladding solutions more accessible to architects, developers, and design professionals in Western India. The centre was formally inaugurated by Prakash Jain, Chairman and Managing Director, Viva Composite Panel, along with Nitin Jain and Mayank Jain, Directors at the company. Conceptualised as an interactive and immersive space,..

Next Story
Technology

Hikrobot Launches HDMI Video Micro System in India

India, July 2025: Hikrobot has introduced its HDMI Video Micro System in the Indian market, offering a plug-and-play imaging solution that combines 2K high-definition clarity, real-time streaming, and portability. The system is designed for professionals in sectors such as industrial inspection, medical research, forensic science, education, and precision manufacturing. Unlike traditional imaging setups that require external PCs and complex software, the Hikrobot HDMI Video Micro System provides direct output to an HDMI display, eliminating setup complications and improving usability.&nbs..

Next Story
Real Estate

Stone Wood Hotels Appoints Shishir Kumar Jena as CFO

Stone Wood Hotels & Resorts has announced the appointment of Shishir Kumar Jena as Chief Financial Officer. This key leadership move aligns with the boutique hospitality group’s ongoing national expansion. Shishir Kumar Jena brings over 32 years of experience in hospitality finance, having held senior positions with renowned brands such as Acron, Radisson, and Fortune Inn Exotica. His expertise spans financial strategy, operational efficiency, revenue optimisation, and aligning financial performance with guest satisfaction. Throughout his career, Jena has maintained a consisten..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?