In exercise of the powers conferred by Section 93(1) of the Finance Act, 1994 read with Section 95(3) of Finance Act, 2004 and Section 140(3) of Finance Act 2007 and in supersession of Notification No. 40/2012-Service tax, dated 20.06.2012 the Government by Notification No. 12/2013-Service tax, dated 01.07.2013 gave exemption to the services on which service tax is leviable under Section 66B of the Finance Act, 1994, received by a Unit located in a Special Economic Zone (‘SEZ’ for short) and Developer of SEZ (‘Developer’ for short) and used for the authorized operation from the whole of the service tax, education cess and secondary and higher education cess levied thereon. This notification came into effect from 01.07.2013.
The exemption is provided as detailed below:
- The exemption shall be provided by way of refund of service tax paid on the specified services received by the SEZ Unit or the Developer and used for the authorized operations;
- Where the specified services received by the SEZ or the developer are used exclusively for the authorized operations, there is an option not to pay the service tax ab initio, subject to the conditions and procedures.
Instead of availing exemption or claiming refund the SEZ unit is having the option to avail CENVAT credit on the specified services in accordance with the CENVAT credit Rules, 2004.
Conditions
The following are the conditions prescribed in this Notification are as follows:
- The SEZ unit or the developer is to get an approval of the Approval Committee of the list of services required for authorized operations;
- The ab initio exemption shall be allowed subject to the following procedure and conditions:
- A declaration shall be furnished in Form A1 verified by the specified officer of the SEZ along with the list of specified services;
- On receipt of the declaration the authorization shall be issued by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be to the SEZ unit or the developer in Form – A2;
- The SEZ unit or the Developer has to provide a copy of the said authorization to the provider of specified services;
- On the basis of the authorization the service provider shall provide the specified services to the SEZ unit or the Developer without payment of service tax;
- The SEZ unit or the Developer has to file Quarterly report in Form A3 furnishing the details of specified services received by it without payment of duty;
- An undertaking in Form A1 is to be furnished that in case the specified services on which exemption has been claimed are not exclusively used for authorized operation or were found to have been used exclusively for authorized operation, it shall pay to the government an amount that is claimed by way of exemption from service tax and ceases along with interest as applicable on delayed payment of service tax;
- The refund of service tax on the specified services that are not exclusively used for authorized operation or the specified services on which ab-initio exemption is admissible but not claimed, shall be allowed subject to the following procedure and conditions:
- The service tax paid on the specified services common authorized to the authorized operation in SEZ and DTA units (Domestic Tariff Area) shall be distributed amongst the SEZ unit or the developer and DTA in the manner as prescribed in Rule 7 of CENVAT Credit Rules;
- For the purpose of distribution the turnover shall be taken during the relevant period;
- The eligibility of refund is of the service tax paid on-
- The specified service on which ab-initio exemption is admissible but not claimed; and
- The amount distributed to it.
- The claim for refund is to be made to the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, in Form A4;
- The amount indicated in the invoice, bill or, as the case may be, challan, on the basis of which refund is being claimed, including the service tax payable thereon shall have been paid to the person liable to pay the service tax thereon, or as the case may be, the amount of service tax payable under reverse change shall have been paid under the provisions of the Act;
- The claim for refund shall be made within one year from the end of the month in which actual payment of service tax was made to the service provider or such extended period as the Authority shall permit;
- Only one claim of refund is to be made for every quarter;
- If already not registered, before filing a claim for refund under this Notification, an application for registration shall be made;
- If more than one SEZ unit registered under a common service tax registration, a common refund may be claimed at the option of the assessee.
- The units shall maintain proper account of receipt and use of the specified services, on which exemption or refund is claimed for authorized operations.
Erroneous refund
Where any sum of service tax paid on specified services is erroneously refunded for any reason whatsoever, such service tax refunded shall be recoverable under the provisions of the said Act and the rules made there under, as if the recovery of service tax is erroneously refunded.
