Avail 20% discount on updated CA lectures for Dec 21 .Use Code RESULT20 !! Call : 088803-20003

ICICI

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More


The Central Government has been always known for the internal inconsistency between the Commerce and Finance Ministry. Both the Ministries have their own agendas and conflict of interest which is the root cause for all such Ambiguities. The Ministry of Finance vide Service Tax Notification No. 4/2004-S.T., dated 31.3.2004 exempted taxable service of any description as defined in clause (90) of sub-section (1) of section 65 of the said Act provided to a developer of Special Economic Zone or a unit of Special Economic Zone by any service provider for consumption of the services within such Special Economic Zone, from the whole of service tax leviable thereon under section 66 of the said Act, subject to the certain conditions. This exemption also includes all those SEZ units which are under construction. For the said purpose Special Economic Zone” means a zone specified as Special Economic Zone by the Central Government in the notification issued under clause (iii) of Explanation 2 to the proviso to sub-section (1) of section 3 of the Central Excise Act, 1944 (1 of 1944).The basic Conditions comprise that the developer has been approved by the Board of Approvals to develop, operate and maintain the Special Economic Zone and the unit of the Special Economic Zone has been approved by the Development Commissioner or Board of Approvals, as the case may be, to establish the unit in the Special Economic Zone. Apart from this it also laid down that the developer or unit of a Special Economic Zone shall maintain proper account of receipt and utilisation of the said taxable services. As per the said exemption notification the “developer” means a person engaged in development or operation or maintenance of Special Economic Zone, and also includes any person authorised for such purpose by any such developer. However the Ministry of Commerce had drafted   the said SEZ Act keeping into account all such possible ambiguities and litigations and had given it an overriding effect. The provisions of  SECTION 51 reads that “The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act”. Further section 26 (e)of the SEZ Act 2005 states that there is exemption from Service Tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone. From the above its evident that the interpretation that the said Services should be consumed within the Special Economic Zone is highly misplaced. The essential ingredient for an exemption to be claimed is that the said services should be provided “to the SEZ”. Thus though the Service Tax Notification uses the term “within such SEZ “ the Overriding Effect of the SEZ Act will prevail over such ambiguities and all Taxable Services provided to the SEZ will be exempted. 

"Loved reading this piece by MONISH BHALLA?
Join CAclubindia's network for Daily Articles, News Updates, Forum Threads, Judgments, Courses for CA/CS/CMA, Professional Courses and MUCH MORE!"






Category Service Tax, Other Articles by - MONISH BHALLA 



Comments


update