Service tax applicability - contractor and sub-contractor

[Guest]

Service Tax in SEZ: Considering recent notification dtd 20th May'09 of SEZ regarding Service TAX - I have a specific Querry. I am an EPC Contractor to a developer of SEZ. My erection and civil contractor are working in SEZ area and giving me erection services within SEZ. Is service TAx chargeable between me and my sub contractor. (My doubt is service tax on transcation between main Contractor and its sub contractor working within SEZ).

[Guest]

If the services of sub-contractors are being consumed directly in SEZ, the same shall remain exempted. On the other side, where the services are not consumed, but treated as in relation to authorized operations in SEZ, the same will be required to be charged to service tax. The unit in SEZ would claim exemption by way of refund.

[Guest]

Thks for your reply- can u please tell me the rule under which...the service tax between EPC contractor and its sub-contractor is exempted from service Tax.

[DINESH MORE]

Please see the SEZ Rule 10(1) of SEZ Rules 2006 where in it clearly stated that even contractor, sub-contractors appointed by developer are alloowed to avail exemption.

[Guest]

Customs Notification - 137/2009, 11TH dEC'09 Goods REquired for expansion of any existing Mega power project......... Custom Duty is revised to 2.5%, what will be SAD, Education Cess etc. Further if any exisiting power project of 800 MW is adding another 800Mw, would it be able to get any benefit or not?

AI Summary

Service tax exemption in SEZ hinges on whether contractor services are directly consumed within the zone, affecting tax liability. Where a sub-contractor's services are consumed directly in the SEZ, those services are exempt from service tax; where services are not consumed in the SEZ but are treated as in relation to authorized operations, they are taxable and the SEZ unit may claim a refund. SEZ rules permit contractors and sub-contractors appointed by the developer to avail the exemption framework, so the key factual test for EPC contractor-sub-contractor transactions is whether the services are directly consumed within the SEZ.