AdminNotification No.12/2013-ST dtd. 01-07-2013
The finance ministry has issued a new notification for grant of exemption or refund of tax on services received by developers and units in special economic zones (SEZ) and used for authorised operations. The idea seems to be to make it easier to claim exemption at the outset from payment of service tax on all services exclusively used for authorised operations and to enable claim of partial refund of tax on services that may be only partly used for authorised operations.
The earlier notification (now superseded) allowed such ab initio exemption of tax on services wholly consumed within the SEZ.
That exemption was linked to the place of performance of the service and the location of immovable properties or assets in the SEZ, according to Rules 4 and 5 of the Place of Provision of Services Rules, 2012. Now, that link has been done away with.
The exemption was also available to SEZ units or developers which did not own or carry on any business other than the operations in the SEZ. That restriction has also been removed. Now, any service that is exclusively used for authorised operations is eligible for ab initio exemption.
The latest notification requires the SEZ unit or developer to get a list of services that will be used for authorised operations (referred to as specified services) approved by the Approval Committee. Then the unit/developer should submit that approved list along with a declaration (form A-1) to the jurisdictional central excise authorities for verification and issue of an authorisation (form A-2). Based on a copy of authorisation issued by the said authorities, the service providers can provide the specified services without charging service tax. In case they prefer to charge the tax, the SEZ unit/developer can claim refund of the same. A quarterly return of specified services received without payment of tax by the SEZ unit/developer has now been prescribed. In case the services so received are not used exclusively for authorised operations, the SEZ unit/developer has to pay the amount of tax plus cesses and interest.
For getting refund of the service tax paid on services that are not used for authorised operations, the formula prescribed in the earlier notification has been done away with. The new notification prescribes the procedure that input service distributors adopt for distribution of service tax to various units, under Rule 7 of the Cenvat Credit Rules, 2004. Here, the formula prescribed in Rule 5 of the Cenvat Credit Rules, 2004, will come into play.
For the purpose of distribution, the turnover of the SEZ unit/developer shall be taken as the turnover of the authorised operations of the unit/developer.
The notification says the SEZ developer/unit can file only one application (form A-4) for every quarter. The limitation period of one year for filing refund application, can be extended by the concerned authorities.
For claim of refund, the SEZ unit/developer must get registered under service tax laws, if not already registered under central excise laws.
The new dispensation enables distribution of tax paid on services received by the head/corporate offices to SEZ unit/developer in the prescribed proportion for subsequent claim of refund.
[Source: www.business-standard.com]
