The AAR in Gujarat has ruled that a unit in a Special Economic Zone (SEZ) is not required to pay GST under the Reverse Charge Mechanism for services received from the Domestic Tariff Area, if it submits a Letter of Undertaking. This decision was made in response to an application by Waaree Energies Limited. The ruling referred to notifications and a clarification from CBIC on a similar issue involving an SEZ unit in IFSC-Gandhinagar. The CBIC’s clarification stated that an SEZ unit could procure RCM services without paying tax if a Letter of Undertaking is furnished. Additionally, the ruling by the Appellate Authority for Advance Rulings in Maharashtra in the case of Portescap had ruled similarly. Although advance rulings do not establish a judicial precedent, they do carry persuasive value during assessments. This ruling could benefit SEZ units in India currently involved in litigation over this issue.
Source A2ztaxcorp
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