TaxTMI 
TaxTMI 
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).
Service tax applicability - contractor and sub-contractor
22 May 2009 
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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. (AI Summary)
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. (AI Summary)