The Central Government exempts the services on which the service tax is leviable under Section 66B of the Finance Act, 1994, received by a unit located in special economic zone or developer of special economic zone (‘claimant’ for short) and used for authorized operations, from the whole of the service tax, education cess and secondary and higher education cess leviable thereon with effect from 01.07.2012 vide Notification No. 40/2012-ST, dated 20.06.2012.
The exemption shall be provided by way of refund of service tax paid on specified services received by the claimant and used for authorized operations Before seeing the further details in this regard we may see the definition of some terms which will be useful for this purpose.
The term ‘wholly consumed’ refers to such specified services received by the claimant for the authorized operations where the place of provision determinable in accordance with the Place of Provision of Services Rules, 2012 is as under:
- In respect of services specified in Rule 4 of the Place of Provision of Services Rules, 2012, the place where the services are actually performed is within the SEZ; or
- In respect of services specified in Rule 5 of the Place of Provision of Services Rules, 2012, the place where the property is located or intended to be located is within the SEZ; or
- In respect of services other than mentioned above the recipient does not own or carry on any business other than the operations in SEZ.
The expression ‘export turnover of goods’ means the value of final products and intermediate products cleared during the relevant period and exported.
The expression ‘export turnover of services’ means the value of the export service calculated in the following manner, namely:
Export turnover of services = payments received during the relevant period for export services +
Export services whose provision has been completed for which
Payment had been received in advance in any period prior to the
Relevant period –
Advances received for export services for which the provision of
Service has not been completed during the relevant period.
The expression ‘total turnover’ means sum of total of the value of-
(a) All excisable goods cleared during the relevant period including exempted goods, dutiable goods and excisable goods exported;
(b) Export turnover of services determined in terms of ‘export turnover of services’ and the value of all other services, during the relevant period;
The exemptions granted in this Notification are subject to the following conditions:
- Where the specified services received in SEZ and used for the authorized operations are wholly consumed within the SEZ, the person liable to pay service tax has the option not to pay the service tax ab initio instead of claiming exemption by way of refund ;
- Where the specified services received by the claimant are not wholly consumed within SEZ, maximum refund shall be restricted to the extent to the extent of the ratio of export turnover of goods and services multiplied by the service tax paid on services other than wholly consumed services to the total turnover for the given period to which the claim relates;
- The claimant shall obtain a list of services that are liable to service tax as are required for the authorized operations approved by the Approval Committee of the concerned SEZ;
- For claiming ab initio exemption, the claimant shall furnish a declaration in Form –A-1 verified by the Specified Officer of the SEZ in addition to the list specified under the condition above noted; the claimant who does not own or carry on the business other than the operations in SEZ shall declare to that effect in Form A-1;
- The claimant shall declare that the specified services on which exemption and/or refund is claimed, have been used for the authorized operations;
- The claimant should have paid the amount indicated in the invoice/bill/challan including service tax payable, to the person liable to pay the said under reverse charge;
- No CENVAT credit of service tax paid on the specified services used for the authorized operations in a SEZ has been taken under the CENVAT Credit Rules, 2004; taxmanagementindia.com
- No refund shall be available on services wholly consumed for operations in the Domestic Tariff Areas worked out in the same manner ;
- Exemption or refund of service tax paid on the specified services other than wholly consumed services used for the authorized operations in a SEZ shall not be claimed except under this Notification;
- The claimant shall maintain proper account of receipt and use of the specified services on which exemptions is claimed for authorized operations in the SEZ.
The procedure for claiming the exemption under this Notification is as follows:
- The claimant shall avail the exemption by filing a claim for refund of service tax paid on specified services for the authorized operations;
- The claim shall be filed to the Assistant Commissioner/Deputy Commissioner of Central Excise having jurisdiction over the SEZ or the registered office or the head office of the SEZ in Form A-2;
- The claim shall be filed within one year from the end of the month in which actual payment of service tax was made;
- If the claimant is not registered with the Central Excise Department, shall before filing a claim for refund file a declaration with the Department in Form A-3; The Assistant Commissioner/Deputy Commissioner shall, after due verification, allot a service tax code number to the claimant within 7 days from the date of receipt of the declaration in Form A-3;
- The claim form shall be accompanied by the following documents:
v A copy of the list of specified services as are required for the authorized operations in the SEZ, as approved by the Approval Committee, wherever applicable, a copy of the declaration made in Form A-!;
v Invoice/bill/challan issued in accordance with the provisions of the Finance Act or rules made there under, in the name of the claimant by the registered service provider, along with proof of payment for such specified services used for the authorized operations and service tax paid, in original;
v A declaration by the claimant, to the effect that-
The specified services on which refund of service tax claimed has been used for the authorized operations in the SEZ;
Proper account of specified services received and used are maintained and the same shall be produced to the officer sanctioning refund on demand;
Accounts or documents furnished by the claimant as proof of payment of service tax claimed as refund, based on the invoice/bill/challan issued by the registered service provider indicating the service tax paid on such specified services, are true and correct in all respects;
- The Assistant Commissioner/Deputy Commissioner after verifying that the refund claim is complete in all respects and the information furnished in Form A-2 and in supporting documents correctly indicate the service tax involved in the specified services used for the authorized operations in the SEZ which is claim as refund and has been actually paid to the service provider, shall refund the service tax paid on the specified services.
- Where any refund of service tax paid on specified services is erroneously refunded for any reasons, whatsoever, such service tax refunded shall be recoverable under the provisions of the said Act and the rules made there under, as if it is recovery of service tax erroneously refunded.
