Even business outside SEZs may get sops

Developers and units in SEZs may be in for some additional service tax exemptions. The Centre is looking at the possibility of extending service tax exemption for services rendered both within and outside SEZs if that particular operation is authorised.

Right now, the finance ministry provides exemptions only for services provided within a zone. The finance and commerce ministries are holding consultations on the issue and a decision is likely to be taken soon. If the exemption is extended to all services, then numerous areas like port-handling, inland transportation, courier and banking would be kept outside the ambit of service tax.

Speaking to ET, sources said that the finance and commerce ministries were holding a series of meetings to settle the issue. According to an official, the SEZ Act already provides for exemptions for services consumed either inside or outside an SEZ as long as it is for an authorised operation within an SEZ. “It is just that the Act is interpreted wrongly by the field officers and the exemption is not provided for services rendered outside an SEZ,” the source said.
The SEZ Act states that exemption from service tax would be provided on taxable services provided to a developer or unit to carry on the authorised operations in a SEZ.

The official explained that according to the Act, if services are provided to a developer or a unit for an authorised operation in a SEZ, then such services are exempted from service tax, irrespective of whether the service is rendered within a SEZ or outside the SEZ.

“While the Act lays down that the authorised operations are to be carried out in the SEZ, it does not state that taxable service is to be provided with the SEZ,” the source said.

Since it is a matter of a difference in interpretation of law, the two ministries will have to sort it out between themselves. “We have already discussed the issue with the finance ministry. We hope that a solution would be reached soon,” a commerce ministry official said.