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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.