The Government has broadened the ambit of services exempted from service tax for special economic zones. Now services provided to these zones even from outside will not be taxable.

The government has exempted the taxable services whether or not the said services are provided inside the special economic zone, the Central Board of Excise and Customs said in a notification issued here today. Currently, services provided physically in an SEZ such as security are exempt from tax while those provided by advertising agencies, management consultants and others from outside the zone are not.The move to broaden the ambit of tax exemption even to services not physically provided in the SEZ will reduce the cost of production. There was a higher cost for SEZs for the services they took. Now that will be reduced. The process of claiming refund is a bit complex, said Ernst and Young partner Vivek Mishra. The services provided to SEZ units were exempted from service tax by the government through a notification on March 31, 2004, though the notification did not talk about exemption of services provided by service providers outside the boundaries of an SEZ.