Exemption to units located in SEZ
This query is : Resolved
08 April 2010
Sir,
In the topic of Service Tax, i am unable to interpret the exemption available for units located in SEZ. I am interpreting it in two ways, which interpretation is the correct one please guide me.
E.G. - Mr.X is a service provider of specified services. And he is providing services to a unit located in SEZ as well as to others. He charge normally Rs.10000/- for services provided.
Interpretation 1
Mr.X will charge Rs10000 + 10.3%(Service Tax) to SEZ.. He will collect the service tax from SEZ and pay it to Govt. And then SEZ will claim Refund of the Service Tax paid by Mr.X.
Interpretation 2
Mr.X will charge only Rs.10000/- from SEZ. And will consider this amount as inclusive of Service Tax and by reverse calculation calculate the Service Tax amount and pay it to Govt coz if the person liable to pay service tax is person other than unit of SEZ then that person ( in the present case Mr. X ) shall not be eligible to claim exemption for the specified services...In the second case SEZ is not required to pay anything for Service Tax.. And in first case SEZ is getting refund of Tax paid...But in the 2nd case service provider is at loss coz though he is not charging service tax separately he will have to pay the service tax out of gross amount collected from SEZ..In that case he will be tempted to charge higher amount from SEZ say Rs.11500/-. If that happens SEZ will have to pay more for the same services which will defeat the intent of Act of providing exemption to units of SEZ.
These are my 2 interpretations please guide me which interpretation is correct..
In the topic of Service Tax, i am unable to interpret the exemption available for units located in SEZ. I am interpreting it in two ways, which interpretation is the correct one please guide me.
E.G. - Mr.X is a service provider of specified services. And he is providing services to a unit located in SEZ as well as to others. He charge normally Rs.10000/- for services provided.
Interpretation 1
Mr.X will charge Rs10000 + 10.3%(Service Tax) to SEZ.. He will collect the service tax from SEZ and pay it to Govt. And then SEZ will claim Refund of the Service Tax paid by Mr.X.
Interpretation 2
Mr.X will charge only Rs.10000/- from SEZ. And will consider this amount as inclusive of Service Tax and by reverse calculation calculate the Service Tax amount and pay it to Govt coz if the person liable to pay service tax is person other than unit of SEZ then that person ( in the present case Mr. X ) shall not be eligible to claim exemption for the specified services...In the second case SEZ is not required to pay anything for Service Tax.. And in first case SEZ is getting refund of Tax paid...But in the 2nd case service provider is at loss coz though he is not charging service tax separately he will have to pay the service tax out of gross amount collected from SEZ..In that case he will be tempted to charge higher amount from SEZ say Rs.11500/-. If that happens SEZ will have to pay more for the same services which will defeat the intent of Act of providing exemption to units of SEZ.
These are my 2 interpretations please guide me which interpretation is correct..
08 April 2010
Both are correct. Pls let me know what is your doubt in this regard.
09 April 2010
Service tax implication on services rendered by a SEZ Unit to DTA Units
Taxable services rendered by SEZ unit to any unit in DTA are subject to service tax. The Ministry of Finance vide Circular No.105/08/2008-ST dated 16.9.2008 has confirmed this position. Service tax is applicable where SEZ units provide taxable services to units/ persons outside the SEZ.
It would be interesting to note that rendering of services from SEZ to DTA does not qualify as import in terms of section 2(o) of the SEZ Act. Therefore, service recipient i.e. the DTA unit would not be liable to deposit service tax under the Finance Act under the reverse charge method. Hence the liability of payment of service tax would be on the service provider, i.e., the SEZ Unit. Accordingly, in the said Circular it has also been clarified that the SEZ units providing technical services to any persons for consumption in DTA (or providing any taxable services which is otherwise not exempt) or is otherwise liable to pay service tax should take registration with the jurisdictional service tax authorities and discharge service tax liability in terms of the Finance Act 1994.
Taxable services rendered by SEZ unit to any unit in DTA are subject to service tax. The Ministry of Finance vide Circular No.105/08/2008-ST dated 16.9.2008 has confirmed this position. Service tax is applicable where SEZ units provide taxable services to units/ persons outside the SEZ.
It would be interesting to note that rendering of services from SEZ to DTA does not qualify as import in terms of section 2(o) of the SEZ Act. Therefore, service recipient i.e. the DTA unit would not be liable to deposit service tax under the Finance Act under the reverse charge method. Hence the liability of payment of service tax would be on the service provider, i.e., the SEZ Unit. Accordingly, in the said Circular it has also been clarified that the SEZ units providing technical services to any persons for consumption in DTA (or providing any taxable services which is otherwise not exempt) or is otherwise liable to pay service tax should take registration with the jurisdictional service tax authorities and discharge service tax liability in terms of the Finance Act 1994.
09 April 2010
Service tax implication on services rendered by a DTA Unit to SEZ Unit/ Developer
Position under the Finance Act, 1994
Under section 93 of the Finance Act, the Government had issued Notification No. 4/2004 S.T., dated 31.3.2004 in respect of SEZs. In terms of the said Notification, taxable services provided to SEZ units or SEZ developers are fully exempt from service tax subject to certain conditions. Among other conditions, one such mandatory condition to avail service tax exemption under the said notification is that the services so provided must be consumed within the SEZ.
In view of the above notification it is construed that taxable services which are availed by the unit or the developer outside the SEZ (even though such services are related to authorized operations) are not exempt from service tax. For instance, rent-a-cab service or transport services provided to employees of SEZ to bring employees to and from place of work would not be entitled to exemption from service tax since the said service is partly provided outside the SEZ. Similarly, services provided by CHA to SEZ at customs port may be denied exemption on the ground that the service is provided outside SEZ.
Position under the Finance Act, 1994
Under section 93 of the Finance Act, the Government had issued Notification No. 4/2004 S.T., dated 31.3.2004 in respect of SEZs. In terms of the said Notification, taxable services provided to SEZ units or SEZ developers are fully exempt from service tax subject to certain conditions. Among other conditions, one such mandatory condition to avail service tax exemption under the said notification is that the services so provided must be consumed within the SEZ.
In view of the above notification it is construed that taxable services which are availed by the unit or the developer outside the SEZ (even though such services are related to authorized operations) are not exempt from service tax. For instance, rent-a-cab service or transport services provided to employees of SEZ to bring employees to and from place of work would not be entitled to exemption from service tax since the said service is partly provided outside the SEZ. Similarly, services provided by CHA to SEZ at customs port may be denied exemption on the ground that the service is provided outside SEZ.
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