Service tax applicability - Sez Developer

[Guest]

i am working as a main contractor to and SEZ(developer). I am having a registered office in India. I am having several civil contractors at site. Is service Tax chargeable on the transcation between my sub contractor and me. Further I have a design sub contractor who is giving me services for design, but the design sub contractor is located outside sez boundary limits. When he bills service tax, will service tax be charged (i.e Is service tax charged between transcation between me and my sub contractor). further What will happen when i bill the same engineering service to developer SEZ. Is any credit/cenvat possible.

[Guest]

The conditions of the notification exemption to services is that services must be consumed in sez. Therefore, where your contractors (sub-contractors) are working in sez and their services are consumed in sez, you can claim the benefit of exemption from service tax. Indeed, where the subcontractor is situated outside sez and his operation are not consumed in sez apparently but in relation to authorized operation in sez the same is eligible for refund after making payment of service tax. Be prepared for a long battle ahead when you claim that a particular service is consumed in SEZ since department would try to establish that a service is in relation to authorized operation in sez.

AI Summary

Service Tax Exemption on SEZ Operations: Refund Possible for External Sub-Contractor Services After Payment and Justification A contractor working with an SEZ developer in India inquired about the applicability of service tax on transactions with sub-contractors, including a design sub-contractor located outside the SEZ. The response clarified that services consumed within the SEZ are exempt from service tax. If services from a sub-contractor outside the SEZ are related to authorized operations within the SEZ, a refund is possible after paying the service tax. However, proving that a service is consumed within the SEZ may require extensive justification, as authorities might argue the service relates to authorized operations within the SEZ.