9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (5) TMI 10 - AAR - Service TaxSEZ units - Services to be provided from SEZ area to SEZ area, DTA area and foreign aviation entities - applicability of service tax on various activities - Scope of Section 51 of SEZ Act, 2005 - held that - Provision of Section 51 of the SEZ Act relating to the said Act having an overriding effect would need to be invoked only if any inconsistency is noticed between the provisions of the SEZ Act and any other law for the time being in force. - Section 64 of the said Finance Act provides that Chapter V of the said Act extends to the whole of India except the State of Jammu and Kashmir. Services provided to and from an entity in a SEZ are provided from India. Section 53(1) of the SEZ Act does not make the Finance Act, 1994 inapplicable to a SEZ. In the absence of any inconsistency there is no need to invoke section 51 of the SEZ Act. If a particular law is applied to SEZs with modifications (the Income Tax Act,1961 applied to SEZ under Section 27 of the SEZ Act), it cannot lead to an inference that other laws which may not have been specifically mentioned in the SEZ Act have no application to SEZs - All central laws apply to SEZs with modifications or exceptions, if any, as provided in the SEZ Act itself or in rules made thereunder. Scope of Sec. 66A - SEZs are deemed to be outside the customs territory of India only for undertaking authorized operations; all other enactments are applicable to the operations carried out in the SEZs. The MRO services would therefore be performed within the territory of India and Section 66 A will have no application in the context of these activities. The services provided by the applicant would be taxable under Section 66 of the said Finance Act, 1994. MRO (Maintenance, Repair and Overhauling) Services - MRO services provided by the applicant cannot also be considered as export of taxable services under the Export of Services Rules, 2005 since in terms of clause (ii) of Rule 3 (1) of the Export of Services Rules, services specified in sub-clause (zzg) of clause (105) of Section 65 of the Finance Act shall be considered as export only if such services are performed outside India. SEZs being part of India, performance of such services in the SEZs does not entitle them to be categorized as exports of taxable services.
Issues Involved:
1. Applicability of service tax on services rendered to overseas entities for contracts with domestic and foreign airlines. 2. Applicability of service tax on services rendered directly to domestic and foreign airlines. 3. Chargeability of service tax on services rendered within the SEZ in view of Sections 51 and 53 of the SEZ Act, 2005. 4. Chargeability of service tax on MRO services under Section 66A of the Finance Act, 1994 read with Rule 3(ii) of the Import of Service Rules. 5. Qualification of MRO services as export of services under the Export of Service Rules, 2005. Detailed Analysis: 1. Applicability of Service Tax on Services Rendered to Overseas Entities for Contracts with Domestic and Foreign Airlines: The ruling confirms that service tax is applicable on the services rendered by the applicant to the overseas entity for contracts with domestic airlines operating domestic flights, domestic airlines operating international flights, and foreign entities operating international flights. The judgment relies on the interpretation that services provided within the SEZ are still considered within the territory of India for the purposes of service tax. 2. Applicability of Service Tax on Services Rendered Directly to Domestic and Foreign Airlines: Similarly, the ruling states that service tax is applicable on services rendered directly by the applicant to domestic airlines operating domestic flights, domestic airlines operating international flights, and foreign entities operating international flights. The same reasoning applies as in the first issue, where the location of the service within the SEZ does not exempt it from service tax. 3. Chargeability of Service Tax on Services Rendered within the SEZ in View of Sections 51 and 53 of the SEZ Act, 2005: The applicant argued that SEZs are deemed to be territories outside India for the purposes of authorized operations, thus exempting them from service tax. However, the ruling clarifies that SEZs are only considered outside the customs territory of India and not outside India itself. Therefore, service tax is chargeable on services rendered within the SEZ unless specifically exempted under the SEZ Act or the Finance Act, 1994. No such exemption exists for the MRO services proposed by the applicant. 4. Chargeability of Service Tax on MRO Services under Section 66A of the Finance Act, 1994 Read with Rule 3(ii) of the Import of Service Rules: The ruling confirms that MRO services proposed to be carried out by the applicant are chargeable to service tax. The applicant's contention that these services should be considered as performed outside India due to their location in the SEZ was rejected. The SEZ is deemed outside the customs territory, not outside India, thus making the services taxable under Section 66A of the Finance Act, 1994. 5. Qualification of MRO Services as Export of Services under the Export of Service Rules, 2005: The ruling states that MRO services rendered to the overseas entity for domestic airlines operating domestic flights, domestic airlines operating international flights, and foreign entities operating international flights do not qualify as export of services under the Export of Service Rules, 2005. Since the services are performed within the SEZ, which is part of India, they do not meet the criteria of being performed outside India, a requirement for being classified as export services. Conclusion: The Authority for Advance Rulings concluded that service tax is applicable on the MRO services proposed by the applicant, whether rendered to overseas entities or directly to domestic and foreign airlines. The SEZ's status as a territory outside the customs territory does not exempt it from service tax under the Finance Act, 1994. Additionally, the MRO services do not qualify as export services under the Export of Service Rules, 2005.
|
