service tax notification no. 17/2011-ST dated: 01.03.2011, Service Tax

[RAJESH GOYAL]

Dear Sir,

On going through the notification no. 17/2011-ST, which has superceeded the earlier notification no. 09/2009-ST, it appears that if any SEZ unit is a standalone unit or it has not any other unit out side SEZ, or it has not any DTA sale, than all services received by such entity will constitute "wholly consumed" services. Does the notification no. 17/2011 has any provision for refund of service tax on "wholly consumed" services. if so please eleborate and if no, than how a unit of SEZ can get their refund of service tax involved in wholly consumed services.

Posts / Replies

[ROHAN THAKKAR]

Dear Sir,

All taxable services (under section 66 or section 66A) received by a SEZ Unit/Developer for the authorised operations, have been exempted in the first paragraph of notification 17/2011-ST, subject to conditions.

In Paragraph 2, conditions attached to this exemption are prescribed. In terms of paragraph 2(a), refund route is the default option for all who intend to claim the exemption granted by the notification in its first paragraph. However, an exception is provided in the form of ab initio (upfront) exemption, to the ‘wholly consumed’ services.

Services which fall outside the definition of ‘wholly consumed’ services can be categorized as those which are used exclusively by the SEZ Unit/Developer, for the authorised operations in SEZ or shared with DTA operations.

Para 2(d) of the notification is applicable to refund arising from ‘shared services’ only. Thus exemption to services exclusively used for the authorised operations of SEZ Unit/Developer, will continue to be available by way of refund, as specified in paragraph 2(a) itself, subject to other conditions. To claim this refund, Table-A, provided in Form A-2 may be used.

It is clarified that only such services shall be considered as exclusively used by SEZ Unit/Developer, for the authorised operations, as they satisfy the following criteria:

(i)                Invoice is raised in the name of the SEZ Unit/Developer or in the invoice, it is mentioned that the taxable services are supplied to the SEZ Unit/Developer for the authorised operations;

(ii)               Such services are approved by the ‘Unit Approval Committee(UAC)’, as required for the authorised operations;

(iii)              Receipt and use of such services in the authorised operations are  accounted for in the books of accounts of the SEZ Unit/Developer.

Thus, for the services which are wholly consumed in SEZ, the service provider is  not required to collect the service tax. Question of refund therefore arises only where the services are consumed partly in SEZ and Partly outside SEZ. In case if the sevice tax has been paid (though) Not required to be paid at all, the refund thereof can be claimed under normal provisions only. For more clarification, Circular No.142/11/2011 - ST dated 18-05-2011  may be referred to.

[Ajaykumar Bhatt]

Please refer to proviso to para 2(a) of the subject Notification, wherein it clearly states that "...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 of Developer claiming exemption by way of refund.."

In view of this, even for the services consumed 'wholly within SEZ', if the service provider is not opting for exemption in such cases, the recipient of the services can claim the exemption by way of refund based on invoices (with service tax) issued by service provider .