Special Economic Zone units to be surveyed for Service Tax Compliance

SEZ units providing taxable services to recipients outside the special economic zones (SEZ) are under Government scanner. The revenue department officials have been directed to submit by October 31 a report on whether such units were discharging their service tax obligations or not. The report is to be submitted to the Director-General of Service Tax. The Central Board of Excise & Customs (CBEC) directive to survey the SEZ units follows a recent report of the Comptroller and Auditor General (CAG) which highlighted that certain SEZ units in Chennai and Kochi were providing taxable services such as manpower supply services, technical testing and analysis service to units / persons outside the zone without payment of service tax.

Taxable services received by SEZ units and SEZ developers for consumption within the SEZ are exempt from service tax. However, service tax is applicable on taxable services provided by SEZ units, except in situations where specifically exempted. In a communiqué to its field formations, the CBEC has said they should ensure that SEZ units, providing taxable services to any person for consumption in domestic tariff area, should register with the jurisdictional service tax authorities and discharge their service tax liability. Meanwhile, The Central Board of Excise and Customs has also clarified that Special Economic Zone units claiming refund of service tax should register with the jurisdictional service tax authorities.

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