CBEC clarification useful, but still not sufficient
May, 23rd 2011
The exemption to service tax on services provided to Special Economic Zone (SEZ) developers/units has always posed some difficulty or the other. The Central Board of Excise and Customs (CBEC) has now come out with a fresh set of clarifications but whether SEZ units and developers will get refunds quickly is a matter of doubt.
To give some background, the finance ministry issued notification no. 17/2002-ST dated 21.11.2002, granting exemption from service tax on services provided to SEZ units/developers but it did not work out satisfactorily, as it prescribed that a committee headed by a chief commissioner should authorise the services to be provided.
A fresh notification no. 4/2004-ST dated the 31.03.2004 also did not work well, because it implied evidence had to be presented of consumption of services in the SEZ.
The next notification no. 9/2009-ST dated 3-3-2009 prescribing that SEZ developers/units must first pay the tax and then claim refund was amended on May 20, 2009, to provide unconditional exemption to services consumed within the SEZ without following the refund route.
It limited exemption by way of refund to situations when only the taxable services provided to SEZs were consumed, partially or wholly outside it.