The government has permitted companies situated in Special Economic Zones (SEZs) to claim service tax refund for services done outside the tax-free export zones too. SEZ developers are also permitted to do the same. The benefit would flow in the shape of "refund of service tax" and not through an exemption.
As per previous norms, if a unit was transporting raw material from a port located outside the SEZ, service tax would have to be paid. Now the unit will be able to apply for refund. The refund will be allowed only for services that are related to authorized operations like activities within SEZs.
Along with this, there is one more change regarding services provided between units located within an SEZ. Earlier, this was exempted but now firms have to claim refund instead of blanket exemption.
L B Singhal, director general of Export Promotion Council for Export Oriented Units (EoUs) and SEZs, greeted the decision and said to reveal some issues, "Service tax has to be paid first and then refund has to be claimed. It would result in unnecessary blockage of funds, paper work and transaction costs. Hence it would be appropriate if exemption could be provided."
As per previous norms, if a unit was transporting raw material from a port located outside the SEZ, service tax would have to be paid. Now the unit will be able to apply for refund. The refund will be allowed only for services that are related to authorized operations like activities within SEZs.
Along with this, there is one more change regarding services provided between units located within an SEZ. Earlier, this was exempted but now firms have to claim refund instead of blanket exemption.
L B Singhal, director general of Export Promotion Council for Export Oriented Units (EoUs) and SEZs, greeted the decision and said to reveal some issues, "Service tax has to be paid first and then refund has to be claimed. It would result in unnecessary blockage of funds, paper work and transaction costs. Hence it would be appropriate if exemption could be provided."
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