Service Tax Within SEZ’s to be Exempt

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Apr. 3 – The Indian government is working towards making service tax payments within Special Economic Zones simpler and less bureaucratic. The Finance Ministry has written to the Election Commission seeking approval to eliminate the lengthy procedure which involves companies within SEZ’s paying service tax and then claiming refunds. Nonetheless, taxes will have to be paid for services rendered outside SEZ’s.

“We have finalized that for services provided to SEZ units outside the boundary will have to pay tax and then claim refund while for services provided inside the unit would be completely exempt from service tax. In this regard we are seeking the approval of the Election Commission,” a Finance Ministry official told the Economic Times.

According to the government of India, SEZ’s are specially delineated duty free enclaves for the purpose of trade, operations, duty and tariffs. These zones are self-contained and integrated and have their own infrastructure and support services. In India, an SEZ may be set-up in the public, private, or joint sector and/or by a state government. The policy requires the minimum size of an SEZ to be 1000 hectares. Within these zones, units may be set-up for the manufacture of goods, provisioning of services, and other activities including processing, assembling, trading, repairing, reconditioning, making of gold/silver, platinum jewelry etc.

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