Input credit of Service Tax in case of services provided to SEZ area

[Mehul Pandya]

Sir,

We are providing Technical Services to the different clients. Some clients are located in SEZ area and they have told us not to charge service tax to them against A-1 form. In this case can we avail input service tax credit against the services provided in the SEZ area. Please suggest is there is any way out to take cenvat credit otherwise we have to bear loss of service tax portion.

[Mahir S]

Yes Sir, you can avail such cenvat credit for services provided in the SEZ area.

Such provision is already available in the credit rules, so there shall not be any loss of service tax credit.

[Mehul Pandya]

Thank you for your reply,

Can you please suggest any notification,circular or case laws favoring the same.

[Rajesh Nathoo]

Dear Mehul ,

Please go through sub rule (6A) of Rule 6 of Cenvat Credit Rules, 2004

The provisions of sub rules 1,2,3,4 shall not be applicable in case taxable services are provided without payment of Service Tax to a unit in SEZ ...............

[Mahir S]

Yes, you can avail input service credit against services provided in the SEZ area, as explained above.

AI Summary

Cenvat credit allowed where taxable services are supplied to SEZ without tax payment, preserving input credit entitlement.
The Cenvat Credit Rules permit availment of Cenvat Credit where taxable services are provided to a Special Economic Zone unit without payment of service tax, because the limiting subrules do not apply to such supplies as set out in the rule provision, preserving the service provider's entitlement to input credit.