Services provided to units in SEZ

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

14 June 2010 Dear Sir,

We are providing Manpower services to units situated under SEZ and not charging service tax on the same as per the notification. I want to now as to what are service tax effect of the same

1. Can cenvat be disallowed for not charging service tax ?

2. Can service tax liability arise on the same ?

Guest

Guest (Expert)

14 June 2010 As per the present interpretation of the provisions of service tax exemption provided to SEZ units is available as follows:

1> Notification No.9/2009-Service Tax, dated 3.3.2009: refund of service tax paid on taxable services specified in section 65(105) of the Finance Act, 1994 which are provided in relation to the authorised operations (as defined under SEZ Act, 2005) in a Special Economic Zone (SEZ), and received by a developer or units of a SEZ.
2> Notification No. 15/2009-Service Tax, dated 20.05.2009: unconditional exemption to services consumed within the SEZ without following the refund route.

Please verify whether services has been consumed within the SEZ?
Services provided to SEZ are not considered as deemed export hence, Rule 6 needs to be followed while availing CENVAT credit.

Querist : Anonymous

Querist : Anonymous (Querist)

14 June 2010 Dear Sir,

Thanks for the prompt reply.

The services are wholly consumed within SEZ, we have taken a declaration from the service receivers also.

However as per my understanding rule 6 only exempts export of services for taking full cenvat and for that the money should be in foreign exchange.

Taking into consideration above facts can cenvat credit be disallowed proportionately.

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Nilesh

Nilesh (Expert)
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23 June 2010 Dear

Presently, it is quite litigative whether service provided to SEZ can be treated as exempted services…

In my personal view you can always argue that services provided to SEZ should be treated as deemed export services and accordingly you can full Cenvat credit

Other option, I will suggest you charge service tax on services provided to SEZ unit and in turn SEZ unit would file refund of service tax paid to you….