SEZ

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survesh (Querist)
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04 March 2011 Respected Sir,

Please say whether service tax is applicable for SEZ unit Service consumed within SEZ (CHA Service)

CMA Nishad Patkar

CMA Nishad Patkar (Expert)
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05 March 2011 Dear Survesh

Is it 100% consumed within the SEZ or Partly consumed?

Regards,

Nishad

survesh

survesh (Querist)
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05 March 2011 Yes 100% Consumed

and if Partly Consumed

Please give both conditions.

Thanks & Regards

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Thank you for your detailed question. Here's a clear explanation of how **Service Tax applies to SEZ units** for **CHA services (Custom House Agent services)** based on **whether they are 100% or partly consumed within the SEZ**, as per the **SEZ Act**, and **Service Tax Notifications** in effect around 2010–2011.

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## ⚖️ Legal Background

* Under **Section 26(1)** of the **SEZ Act, 2005**, and relevant **Service Tax Notifications** (especially **Notification No. 9/2009-ST**, as amended), **SEZ units and developers are entitled to exemption/refund of service tax** on **“taxable services consumed for authorized operations.”**

* **Custom House Agent (CHA) services** used for import/export by SEZ units are generally considered part of authorized operations.

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## ✅ Case 1: **Service 100% Consumed within SEZ**

**Example**: CHA agent operates entirely within the SEZ premises – handling documents, customs clearance for goods that remain within the SEZ.

### ➤ Is Service Tax Applicable?

**No.**

### ➤ Why?

When services are **wholly consumed within the SEZ**, they are **directly exempt** from service tax. That means:

* The **service provider should not charge service tax** on the invoice.
* The SEZ unit can furnish the required **SEZ exemption documents** (like Form A1/A2 under Rule 6A of the Service Tax Rules or approved list of services).
* **No need to claim refund**, because no tax is paid in the first place.

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## ⚠️ Case 2: **Service Partly Consumed within SEZ**

**Example**: CHA service involves movement of goods/documents partly outside SEZ – such as from a port or warehouse to the SEZ, or customs clearance outside the SEZ premises.

### ➤ Is Service Tax Applicable?

**Yes, initially.**

### ➤ Can SEZ unit claim exemption?

Yes, but it would be via the **refund route**, not upfront exemption.

### ➤ What should be done?

1. **Pay service tax** to the CHA provider (if they charge it).
2. **Apply for refund** under the relevant notification (e.g., Notification 9/2009-ST or 17/2011-ST).
3. Ensure:

* The service is listed in the **approved list of services** for authorized operations.
* Proper documentation (invoices, proof of payment, authorization, etc.) is maintained.

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## 📌 Summary Table

| Service Use | Service Tax Applicability | Exemption Method | Action Required |
| ----------------- | ------------------------- | ------------------------ | -------------------------------------------- |
| 100% Within SEZ | **Not applicable** | **Direct Exemption** | Give exemption letter to CHA; no tax charged |
| Partly Within SEZ | **Applicable initially** | **Refund after payment** | Pay tax → Claim refund from Dept. |

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Let me know if you'd like a sample **exemption letter format** or **refund application format** for SEZ-related service tax!

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