Service Tax Exemption to SEZ - CA. Rajendra Kumar P

Service Tax Exemption to SEZ-The latest Notification
CA. Rajendra Kumar P

At last wisdom has dawned on the bureaucrats manning the North Block just when the new Government is about to assume office. A recent Notification has granted the exemption to “services consumed wholly within the special economic zones”. It may be highlighted here that this exemption which was the original version was withdrawn and in its place refund mechanism was notified by Notification No.9/2009 dated March 3, 2009. Notification No.15/2009 dated May 20, 2009 has restored the exemption route sans refund only to services wholly consumed within the special economic zones.

By virtue of this notification services provided to a developer or units in SEZ is exempted from the charge of service tax provided the said service is consumed wholly within the special economic zone. Hence, those services which are not consumed within the SEZ will be liable to tax and the developer or unit, as the case may be, shall be eligible lodge a claim for refund of such tax. Hence, it is now abundantly made clear that SEZ should register with service tax and apply for refund of service tax paid by them. The department grants refund only from the date the application for registration is made and for the period when registration is not applied the service tax is rejected. Hence, those units and developers who have not made an application for registration should apply for the same immediately so as to be eligible for refund.

Taxable services are numerous and it would be a mind blowing exercise to conclude which service is wholly consumed within SEZ and which is not. Interpretation issues are bound to arise adding to the large number of cases pending before the appellate authorities.