EXEMPTION TO SERVICES RECEIVED BY DEVELOPER OR UNITS OF A SPECIAL ECONOMIC ZONE

EXEMPTION TO SERVICES RECEIVED BY DEVELOPER OR UNITS OF A SPECIAL ECONOMIC ZONE

Exemption to services received by a developer or units of a Special economic zone, earlier provided vide Notification No. 17/2011-ST has now been granted vide Notification N.42/2012-ST dated 20/06/2012. The exemption is proposed to be provided by way of refund of service tax paid on the specified services by a unit located in a Special Economic Zone (SEZ) or the developer and used for the Authorised operations.

REFUND ROUTE

• SPECIFIED SERVICES WHOLLY CONSUMED WITHIN THE SEZ: Where the services are received in SEZ and used in authorised operations are wholly consumed within SEZ, then the person liable to pay service tax has the option not to pay the service tax. Hence, under this option, instead of the Unit or Developer claiming exemption by way of refund, service tax may not be paid ab initio.

• SPECIFIED SERVICES PARTIALLY CONSUMED WITHIN AND OUTSIDE THE SEZ: Where the services received and used for authorised operations are partially consumed within SEZ and partially outside SEZ i.e. shared services, then the exemption shall be provided only by way of refund of service tax paid on the specified services received for the authorised operations in a SEZ. Hence, the option of not paying the service tax is not available here.

• SHARED SERVICES BETWEEN SEZ AND DOMESTIC TARIFF AREA (DTA): Where the specified services received by Unit or Developer are not wholly consumed within SEZ i.e. shared between authorised operations in SEZ unit and Domestic Tariff Area (DTA) unit, the maximum refund shall be:

Maximum Refund= Service Tax paid on shared services × Export Turnover

Total Turnover

Where

(a) Export Turnover includes both Export Turnover of goods and services

(b) Export Turnover of goods means the value of final products and intermediate products cleared during the relevant period and exported.

(c)  Export Turnover of services =

Payments received for export services

 (+) Export services whose provision has been completed for which payment had been received in advance in any period prior to the relevant period

(- ) Export services whose provision has not been completed for which payment had been received in advance.

SERVICES	SERVICE TAX TO BE PAID	REFUND
WHOLLY CONSUMED WITHIN SEZ	FULLY EXEMPT OPTION NOT TO PAY SERVICE TAX	NO NEED TO CLAIM AS TAX NOT PAID
NOT WHOLLY CONSUMED	SERVICE TAX PAYABLE AT THE PRESCRIBED RATES	SERVICE TAX PAID
SHARED SERVICES BETWEEN SEZ & DTA	TAX ON SHARED SERVICES	TAX ON SHARED SERVICES × EXPORT T/O Total Turnover

(d) Total turnover means the sum total of the value of all excisable goods cleared during the relevant period including exempted goods, dutiable goods and excisable goods exported and export turnover of services (explained above) and the value of all other services.

This Article has been Shared by Student of ICAI Palak Aggarwal. She Can be reached at aggarwal.palak2809@gmail.com

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