CONDITIONS AND PROCEDURE FOR AVAILING EXEMPTION TO SERVICE TAX BY A UNIT IN SEZ OR DEVELOPER OF SEZ

[Mr. M. GOVINDARAJAN]

Exemption:

Vide Notification No. 17/2011-Service Tax, dated 01.03.2011 the Central Government, by virtue of powers conferred to it by Section 93(1) of Finance Act, 1994 read with Section 93(3) of Finance Act, 2004 and Sec. 140(3) of Finance Act, 2007 and in supersession of the Notification of the Government of India in the Ministry of Finance No.9/2009-ST, dated 03.03.2009,  exempts the taxable services specified in Sec.65 (105) of the Finance Act chargeable to tax under Section 66 or Section66A of the Finance Act, received by a unit located in Special Economic Zone or Developer of SEZ for the authorized operations from the whole of the service tax, education cess and secondary and higher education cess leviable thereon.

Conditions:

The conditions to avail exemption contained in the notification are as follows:

• The exemption shall be provided by way of refund of service tax paid on specified services received for the authorized operations in a SEZ.  Where the specified services received and used for authorized operations are wholly consumed within the SEZ, the provider of such services or the receiver of such services on reverse charge basis, as the case may be, has the option not to pay the service tax ab initio instead of the Unit or Developer claiming exemption by way of refund in terms of this Notification.
• The Developer or Unit of SEZ shall obtain  a list of taxable services as are required for the authorized operations approved by the Approval Committee of the concerned SEZ;
• The Developer or Unit of SEZ who does not own or carry out any business other than SEZ operations, shall furnish a declaration to that effect in Form A-1, verified by the Specified Officer of SEZ, in addition to obtaining list mentioned in the previous point for the purpose of claiming exemption;
• Where the specified services received by Unit or Developer  are not wholly consumed within SEZ refund shall be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates;
• Any Developer or Unit of SEZ shall declare that the specified services on which exemption and/or refund is claimed to have been actually used for the authorized operations;
• The Developer or Unit of SEZ claiming the exemption, by way of refund has actually paid the amount indicated in the invoice, bill, challan, including the service tax payable, to the person liable to pay the said tax or the amount of service tax payable under reverse charge, as the case may be, under the provisions of the Finance Act;
• No CENVAT credit of service tax paid on the specified services used for the authorized operations in a SEZ has been under the CENVAT Credit Rules, 2004;
• Exemption or refund of service tax paid on the specified services other than wholly consumer services used for the authorized operations in a SEZ shall not be claimed except under this notification;
• The developer or a unit of a SEZ, who intends to avail exemption and or refund under this notification, shall maintain proper account of receipt and use of the specified services on which exemption is claimed, for authorized operations in the SEZ.

Meaning for ‘wholly consumed’:

For the purposes of this notification, the expression ‘wholly consumed’ refers to the following taxable services, received by a Developer or Unit of a SEZ, for the authorized operations namely:

• Services listed in Rule 3(1)(i) of the Export of Services Rules,2005 in relation to immoveable property situated in the SEZ; or
• Services listed in Rule 3(1)(ii) of Export of Services Rules, 2005, as are wholly performed within the SEZ; or
• Services other than those falling the above two, provided to a Developer or Unit of SEZ, who does not own or carry on any business, other than the operations in the SEZ.

Meaning for ‘turnover’:

The expression ‘total turnover’ means the sum total value of-

• All output services and exempted services provided, including the value of services exported;
• All excisable and non excisable goods cleared, including the value of goods exported;
• Bought out goods sold

During the period to which the invoices pertain and the exporter claims the facility of refund on this notification. ‘Turnover of SEZ unit’ shall mean the sum total of the value of final products and output services exported during the period of which the invoices pertain and the exporter claims the facility of refund under this notification.

Procedure for claiming exemption:

The Developer or a Unit of a SEZ, who has paid the service tax under Section s66 of the Finance Act, shall avail the exemption by filing a claim for refund of service tax on specified services used for the authorized operations;

The refund claim shall be filed to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the SEZ or registered office or the head office of the Developer or Unit, as the case may be, in Form A-2;

The Developer or Unit of a SEZ who is not so registered under the provisions shall, before filing a claim for refund file a declaration with the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the SEZ or registered office or the head office of the Developer or Unit, as the case may be, in Form A-3;

The Assistant Commissioner/Deputy Commissioner shall after due verification allot a service tax code number to the Develop or unit of SEZ within 7 days from the date of receipt of the said declaration in Form A-3;

The claim for refund shall be filed within one year from the end of month in which actual payment of service tax was made by such developer or unit to the registered service provider or such extended period as the Assistant Commissioner/Deputy Commissioner shall permit;

 The refund claim shall be accompanied by a copy of the list of specified services as approved by the Approval committee, invoice or a bill in the name of the Developer or Unit of SEZ by the registered service provider along with proof of payment and a declaration by the Developer or Unit of SEZ claiming such exemption that that effect.

The declaration claim exemption shall be to the effect that-

-  the specified services on which the refund of service tax claimed has been actually used for the authorized operations in the SEZ;

- proper account of the specified services received and used for the authorized operations are maintained by the developer or unit of the SEZ and the same shall be produced to the officer sanctioning refund, on demand;

-accounts or documents furnished by the Developer or Unit as proof of payment of service tax claimed as refund, based on the invoice, or bill, or as the case may be challan issued by the registered service provider indicating the service tax paid on such specified services, are true and correct in all respects;

The Assistant Commissioner/Deputy Commissioner after verifying that the refund claim is complete in all respects and the information furnished in Form A-2 and in supporting documents correctly indicate the service tax involved in the specified services used for the authorized operations in the SEZ, which is claimed as refund, and has been actually paid to the service provider, shall refund the service tax paid on specified services;

 A service provider shall provide the specified services falling under ‘wholly consumed’ category under exemption granted by this notification, to a Developer or Unit of SEZ, for authorized operations, subject to the production of documents;

 Where any refund of service tax paid on specified services is erroneously refunded for any reasons whatsoever such service tax refund shall be recoverable under the said Finance Act and the rules made there under, as if it is recovery of service tax erroneously refunded.                            

Discussions to this article

[AKALESH RAWAT]

What i understand in relation of Service Provider who providing Services to SEZ, should obtain declearation copy in Form A -1 before claiming it as Exempted services.