service povide by SEZ unit treated as export or not

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vishesh chaturvedi (Querist)
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23 January 2009 if a indian company performs a work given by another company situated in Special economic zone (puna),that work is to be performed for another comapny situated at singapore.
sez unit company recieved payment in FCNR account from singapore company
and charges 7% cut and give rest amount to indian company who actually performed the work at singaporeabout 93% in his FCNR account .
Is the payment recieved by indian company from sez unit treated as export which is
exempt from Service tax.

Dayal

Dayal (Expert)
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19 April 2009 Services provided to SEZ unit no longer stands exempted from service tax, therefore sevices rendered by you to the SEZ will be subject to service tax, for which the sez can claim.

You have not mentioned as to how you have billed the SEZ unit for receiving the payment. Whether, you have charged service tax which is inclusive of the payment received by you.

Not clear????

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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23 July 2025 This is a nuanced question involving **Service Tax law (pre-GST)** and treatment of services provided **via SEZ units**, particularly when an Indian company does work **for a foreign client** but gets paid **through an SEZ intermediary**. Let’s break it down clearly:

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### 🔍 **Facts of Your Case (as of 2009)**:

* Indian Company A provides services (possibly on-site in Singapore).
* Work was given by SEZ Unit (Company B in Pune).
* End client is a **foreign company in Singapore**.
* Singapore client pays the SEZ unit in **foreign currency (FCNR)**.
* SEZ unit keeps **7% as commission**, and remits **93% to Indian Company A**, also in **FCNR**.

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### 🟢 **Question**:

**Is the service provided by Indian Company A treated as an "export of service" and exempt from Service Tax?**

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## ✅ **Short Answer: YES**, likely treated as **Export of Service** and **exempt** from Service Tax.

### 💡 **Reasoning Based on Export of Services Rules, 2005** (applicable in 2009):

According to Rule 3 of the **Export of Services Rules, 2005**, a service is treated as **export of service** if:

1. **Service provider is in India** ✔️
2. **Service recipient is outside India** or payment is received in **foreign convertible currency** ✔️ (payment is received in FCNR)
3. **The service is delivered outside India**, or used outside India ✔️ (service performed in Singapore)

Additionally, Rule 6A of the Service Tax Rules (added later) and various CBEC circulars clarified that:

> If a service is **ultimately used outside India** and payment is received in **foreign currency**, even if routed via an SEZ unit, it may be treated as **export of service**.

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### 🔐 **What Matters Most**:

* The **end user of the service** is **outside India** ✔️
* The **payment is in convertible foreign exchange** ✔️
* The service is **performed or consumed outside India** ✔️

Even though the SEZ unit is located in India, it's merely acting as a facilitator. The **real recipient is foreign**, and that supports export classification.

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### 📜 **Supporting Legal References**:

* **Export of Services Rules, 2005** – Rule 3
* **Section 93 of the Finance Act, 1994**
* CBEC Circular No. **111/5/2009-ST dated 24 Feb 2009**
* CBEC Education Guide (2012) — clarified service tax exemptions for exports

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### ❌ Caution:

* Documentation must support the **end client is foreign**.
* The **contractual arrangement** must show Indian company is **providing service “to” foreign entity**, even if via SEZ.

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### ✅ Final Answer:

Yes, based on the facts:

* The Indian company’s service can be treated as **export of service**,
* Therefore, it is **exempt from service tax**, **provided** all conditions under Export of Services Rules, 2005 are met and **proper documentation** is maintained.

Let me know if you want a ready-to-print note with these legal references.

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