Nath hardsells relief for suppliers to SEZ

NEW DELHI: Services supplied to special economic zones outside the zone may be exempted from service tax. Making a strong pitch for the move, the commerce ministry has asked the revenue department to provide the exemption. A decision on the proposal is expected at a meeting on April 16.

The commerce ministry feels services supplied to a SEZ developer or unit to carry out authorised operations in a special economic zone were tax-exempt and the provision does not state that the operations had to be carried out within the SEZ.

It has now taken up the issue with the revenue department as its service tax wing was limiting the exemption. Service tax officials were limiting the waiver as an earlier circular had provided service tax exemption for consumption of a service within the zone.

Since the provisions of the SEZ Act do not specify if the service has to be consumed within a SEZ, the revenue department cannot impose tax on services consumed outside the zone for carrying out the business of the zone, a commerce ministry official told ET.
Ministry officials will now hold a meeting with their counterparts in the revenue department to resolve the issue.

The SEZ Act became operational from February 10, 2006. Section 26 of the Act gives details of the exemptions and concessions available to SEZ developers and entrepreneurs.

SEZ developers & units and the export promotion council for export-oriented units and SEZs has taken up the matter on many occasions with officials from both the departments. But with tax officials raising demands on them, it had created an air of uncertainty.