This has nothing to do with being within the jurisdiction of the GDPR or not. There are a variety of national laws worldwide which effectively overlap with or subset the GDPR (because most governments do seem to find protection of personal data worthwhile for their citizens), and Microsoft has to deal with those (either at the behest of their customers or because they are required to).

But Microsoft can totally handle applying the GDPR correctly. They have a lot of countries as customer which use Azure in some capacity and where the need for comprehensive audit logging exists. What you were seeing is a bug; or rather a design flaw, marked as WONTFIX. Some customer rep was giving you the two-fingered salute by starting with 'but GDPR…'.