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New SEZ Notification announced
In a recent development, and in response to several industry representations in the past few months, the Indian Central Government has issued Notification 12/2013 – ST, aka the new SEZ Notification. Taxand India discovers what the new SEZ Notification will mean for SEZ developers and units.
The new SEZ Notification seeks to address and alleviate specific pain points and issues faced by SEZ developers and SEZ units in claiming service tax exemption on taxable services received and used by them in their authorised operations.
While retaining the basic tenet that SEZ developers and SEZ units shall be entitled to a refund of service tax in general and upfront exemption under specified circumstances, the new SEZ Notification has considerably expanded the scope of upfront exemption as well as eligible refunds.
The new Notification envisages the following benefits to SEZ developers and SEZ units, in respect of service tax leviable on taxable services received and used for authorised operations:
- Refund of service tax paid on specified services received and used for authorised operations
- Option of upfront or ab initio exemption where specified services are received and used exclusively for authorised operations
The new SEZ Notification also puts to rest the current controversy of CENVAT eligibility of SEZ developers and SEZ units by clarifying that they will have the option to not avail of the exemption/ refund provided under the Notification and instead take CENVAT credit on the specified services.
Overall, the scheme and intent of the new SEZ Notification is a welcome relief in the context of a host of interpretative as well as operational issues in claiming the benefits under the erstwhile scheme(s). Even from a service provider’s perspective the case for claiming upfront exemption is strengthened by virtue of the new form as well as the provision mandating recovery of incorrect exemption claims from the erring SEZ developer/ SEZ unit. However, the real success of this scheme shall hinge on the appropriate implementation of the same by authorities at the ground level.