Service Tax - services provided to SEZ - exempted or taxable? Commerce vs Finance
When the Commerce Ministry promises you something, please don't believe them, but please be kind to them and forgive them, for they have no right to promise or rather they have only a right to promise but no power to deliver. There is always the Finance ministry to thwart all the efforts of the Commerce Ministry in promoting exports - the Finance ministry is hell bent on exporting all the taxes which it imposes.
Take the case of Service Tax. Ever since he took over, Mr. Kamal Nath had been loudly proclaiming that there would be no Service Tax on exports, no Service Tax on EOUs and he even got a law passed by Parliament - the SEZ Act, which says that there will be no Service Tax on services provided for SEZ units and that this law would prevail over all other laws. But he forgot to add a clause that the Act has supremacy over the Revenue Babus also.
The Commerce Ministry feels that services provided to the SEZ units are exempted and the Commerce Secretary wanted to issue a circular to that effect, but the Revenue babus are adamant that only services consumed within the SEZ are exempted.
CBEC Member JMK Sekhar wrote a letter to the Additional secretary, Commerce that Department of Revenue is, of the view that the circular proposed by the Ministry of Commerce is not consistent with the statutory provisions of the SEZ Act and the Rules made thereunder.
This was followed by a letter from the Revenue Secretary to the Commerce Secretary (strict protocol) that in terms of Allocation of Business Rules, prior concurrence of the DOR would be required before taking any decision that adversely impinges tax revenues and you may like to bear this in mind before finalizing your views with respect of the proposed Circular.
Today we bring you an analysis of the issue from our Research Team. {Please see TIOL TOP}
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