Taxable services provided to SEZ developers and units – Exemption with conditions and complexities
AFTER a long hiatus, the much needed up-gradation of Notification No. 4/2004-ST dated March 31, 2004 which earlier provided exemption to taxable services provided to SEZ developers and units (including units under construction) is here. However, the Government issued a Notification in supersession of Notification No. 4/2004-ST exempting taxable services provided in relation to the authorized operations in a SEZ and received by a developer or units of a SEZ with certain conditions. The previous exemption notification restricted the exemption to services provided by service providers for consumption within the SEZ whereas the new notification provides for exemption whether or not the taxable services are provided inside the SEZ.
However, this time around the exemption is provided by way of refund of service tax paid on the specified services used in authorized operations subject to the satisfaction of the Jurisdictional Assistant/Deputy Commissioner. Unfortunately, what is unclear from this Notification is where do the developer or units of SEZ have to file the refund claim – Is it the Assistant/Deputy Commissioner having jurisdiction over the SEZ or that of a service provider?
The exemption is available to developer or units of SEZ provided:
(i) the developer or units of Special Economic Zone shall get the list of services specified in clause (105) of section 65 of the said Finance Act as are required in relation to the authorised operations in the Special Economic Zone, approved from the Approval Committee (hereinafter referred to as the specified services);
(ii) the developer or units of Special Economic Zone claiming the exemption actually uses the specified services in relation to the authorised operations in the Special Economic Zone;
(iii) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone;
(iv) the developer or units of Special Economic Zone claiming the exemption has actually paid the service tax on the specified services;
(v) no CENVAT credit of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone has been taken under the CENVAT Credit Rules, 2004;
(vi) Exemption or refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone shall not be claimed except under this notification.
Further the following conditions are prescribed to claim the benefit of this exemption notification:
(a) the person liable to pay service tax under sub-section (1) or sub-section (2) of section 68 of the Finance Act shall pay service tax as applicable on the specified services provided to the developer or units of SEZ and used in relation to the authorised operations in the SEZ , and such person shall not be eligible to claim exemption for the specified services:
(b) the developer or units of SEZ shall claim the exemption by filing a claim for refund of service tax paid on specified services;
(c) the developer or units of SEZ shall file the claim for refund with the jurisdictional Assistant/Deputy Commissioner of Central Excise;
(d) the developer or units of SEZ who is not registered as an assessee under the Central Excise Act, 1944 or the rules made there under, or the said Finance Act or the rules made there under, shall, prior to filing a claim for refund of service tax under this notification, file a declaration in the prescribed Form (annexed to the Notification) with the respective jurisdictional Assistant/Deputy Commissioner of Central Excise;
Where is it prescribed that developer or units of SEZ have to get registered under Central Excise?
(e) the jurisdictional Assistant/Deputy Commissioner of Central Excise shall, after due verification, allot a service tax code (STC) number to the developer or units of SEZ within seven days from the date of receipt of the said Form;
Where is the need for allotment of a separate service tax code to developer or units of SEZ ? Is it not an unwarranted bureaucratic hassle?
(f) the claim for refund shall be filed, within six months or such extended period as the Assistant/Deputy Commissioner of Central Excise shall permit, from the date of actual payment of service tax by such developer or unit to service provider;
What is the time frame up to which the extension can be provided by the jurisdictional officer? Will it be within the purview of s. 11B of Central Excise Act, 1944?
(g) the refund claim shall be accompanied by the following documents, namely:-
(i) a copy of the list of specified services required in relation to the authorised operations in the SEZ as approved by the Approval Committee;
(ii) documents evidencing payment of service tax;
(iii) a declaration by the SEZ developer or unit, claiming such exemption, to the effect that such service is received by him in relation to authorised operation in SEZ.
(h) the Assistant/Deputy Commissioner of Central Excise shall, after satisfying himself that the said services have been actually used in relation to the authorised operations in the SEZ, refund the service tax paid on the specified services used in relation to the authorised operations in the SEZ;
When the copy of list of specified services required for authorized operations in SEZ as approved by the Approval Committee is given along with the refund claim, where is the need for an Assistant/Deputy Commissioner to satisfy that they are actually used in the authorized operations. All that the officer has to do is to satisfy himself if they are specified taxable services eligible for exemption as per the preamble of the notification.
(i) Where any refund of service tax paid on specified services is erroneously refunded for any reasons whatsoever, such service tax refunded shall be recoverable under the provisions of the said Finance Act and the rules made there under, as if it is a recovery of service tax erroneously refunded.
Services provided by SEZ in DTA still remain in the realm of doubt.
Notification No. Dated: March 3, 2009