GST on hotel services provided by SEZ units in Gujarat
- Ruling
- GUJ/GAAR/RULING/2018/14 dated 30.07.2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
In short
The company asked the Authority for Advance Ruling (AAR) if hotel services provided within a Special Economic Zone (SEZ) qualify as zero-rated supplies under the Goods and Services Tax (GST) framework. The core issue was whether providing food, beverages, and accommodation to different types of guests inside the Dahez SEZ attracts GST or qualifies for tax exemptions.
What has changed
How it worked before
Businesses operating within an SEZ often assumed that all services provided from their premises were automatically treated as exports. There was uncertainty regarding whether hospitality services like food and lodging for non-SEZ visitors could also be treated as zero-rated supplies.
What has changed
The authority decided that only services provided to other SEZ units for authorized operations qualify as zero-rated supplies. If you provide services to a visitor from outside the SEZ, you must charge GST as if the service were provided in the normal domestic market. For example, a hotel room booked by an SEZ employee for work is zero-rated, but a room booked by a tourist from outside the zone is taxable.
Who this affects
This ruling is relevant for hotel owners, hospitality businesses, and service providers operating as developers or units within any Special Economic Zone in India.
What you should do
You should review your current billing practices to ensure you are correctly distinguishing between SEZ-based clients and outside visitors. Remember that an advance ruling is only binding on the specific business that requested it and its local tax office, so you cannot automatically apply this to your own business without consulting your tax advisor.
The ruling in detail
Authority for Advance Ruling
M/s. Sapthagiri Hospitality Private Limited
GUJ/GAAR/RULING/2018/14 dated 30.07.2018 · Gujarat
Questions before the authority
- The hotel being located in non-processing zone of Dahez Special Economic Zone whether liable to pay GST on all the services provided by it to the clients located in SEZ which inter-alia included supply of services by way of providing accommodation services, supplying food and beverages and supplying services ancillary to providing accommodation services?
- Under extreme circumstances, if the hotel is required to provide accommodation services to a visitor other than a visitor located in SEZ, whether GST is required to be paid?
Facts
The applicant is a SEZ Co-Developer operating a hotel in the non-processing zone of Dahez SEZ. They provide hospitality services, including accommodation, food, and beverages, to both clients located within the SEZ and visitors from outside the SEZ. The applicant sought a ruling on whether these services qualify as zero-rated supplies under the GST framework.
Ruling
| Question | What the authority ruled |
|---|---|
| Services to clients within SEZ | Zero-rated Must be for authorized operations |
| Services to clients outside SEZ | Taxable Liable to IGST under normal course of supply |
The authority ruled that services provided to clients located within the SEZ for authorized operations are treated as **zero-rated supplies**. Conversely, services provided to clients located outside the SEZ territory are **liable to GST** under the normal course of supply.
Reasoning
The ruling relies on Section 16(1) of the IGST Act, which defines zero-rated supply to include supplies made to an SEZ developer or unit. It further references Section 2(m)(iii) of the SEZ Act, 2005, to confirm that services provided between units or developers within an SEZ qualify as exports. However, the authority clarified that services rendered from an SEZ to the Domestic Tariff Area (DTA) do not qualify as zero-rated. Therefore, such supplies are subject to IGST under Section 5(1) of the IGST Act as they fall under the normal course of supply.
Provisions relied on
- Section 97(2)(e) of CGST/GGST Act, 2017
- Section 2(20) of IGST Act, 2017
- Section 7(5)(b) of IGST Act, 2017
- Section 8 of IGST Act, 2017
- Section 16(1) of IGST Act, 2017
- Section 2(m)(iii) of SEZ Act, 2005
- Section 5(1) of IGST Act, 2017
For the practitioner
This ruling confirms that hospitality services provided by an SEZ Co-Developer to other SEZ units for authorized operations qualify for zero-rating. It clarifies that the benefit of zero-rating does not extend to services provided to visitors from the Domestic Tariff Area. Practitioners can use this to distinguish the tax treatment of hotel services based on the location and status of the recipient.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/guj.14-2018-19_dt_30.07.18_shpl.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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