In a major relief to firms the government has announced to extend tax relief to companies who are providing services from the tax-free export zones. Developers are also entitled to avail the benefits of tax exemptions under the new norms. However, tax benefits would be extended only for permitted activities within SEZs.

A statement by commerce ministry said that government has also decided to exempt the zones from all indirect taxes for authorized operations. The Empowered Group of Ministers has already endorsed the viewpoint of commerce ministry in a meeting held on August 2008 chaired by External Affairs Minister and Finance Minister Pranab Mukherjee.

Rajeev Dimri, Leader, Indirect Tax Practice, BMR Advisors said, "Developers and units will have to pay service tax before claiming refund. Moreover, some services subscribed may not be in relation to the authorized operations, so the refund granted could be lesser than the amount applied for."

The director general of Export Promotion Council for Export Oriented Units (EoUs) and SEZs, L B Singhal also hailed the decision and said, "Service tax has to be paid first and then refund has to be claimed. It would result in unnecessary blockage of funds, paper work and transaction costs. Hence it would be appropriate if exemption could be provided."