No tax on services used within SEZ

Jul 19 2013, 01:00 IST
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SummaryQueries on taxation and service tax liabilities, addressed by Vivek Sharma & Manav Saneja of EY

We are a Delhi-based management consultancy. We provide to SEZ units services that are carried out within the SEZ. In this regard, we wish to understand if benefit under notification 40/2012-ST dated June 20, 2012 would be available to us by way of exemption. Kindly suggest.

As per the above notification, upfront exemption was provided in case services received are wholly consumed within the SEZ. Further, in order to determine if the service has been ‘wholly consumed within the SEZ’ a reference was made to the ‘Place of provision’ of Service Rules, 2012.

However, please note that the CBEC has recently issued a notification 12/2013-ST dated July 1, 2013 superseding the earlier notification. The present scheme extends the benefit of upfront exemption to all taxable services received and used exclusively for the authorised operations of the SEZ Developer/SEZ unit contrary to the previous scheme which restricted upfront exemption from payment of service tax to services ‘wholly consumed’ within the SEZ.

Accordingly, in case management consultancy services provided by you are used exclusively for authorised operations of the SEZ developer/SEZ Unit, then services provided by you would qualify for exemption from service tax, subject to certain procedural conditions.

No entry tax in West Bengal

Our company manufactures garments in Darjeeling, West Bengal. We have been informed that recently some amendment has been made with regard to the applicability of entry tax in the state of West Bengal. Can you please give us the exact details of the amendment?

Please note that there has not been any amendment in the entry tax laws of West Bengal. Instead, a judgment has been issued by the High Court of West Bengal, in the case of Impex Metals & Ferro Alloys Ltd, Siemens Ltd, Eveready Industries India Ltd and Century Extrusions Ltd relating to the constitutional validity of West Bengal Entry tax Act, 2012. The judgment delivered on June 26, 2013 held the West Bengal Entry Tax Act to be ultra vires Section 304(b) of the Constitution, on the grounds that the same is non-compensatory and unconstitutional in nature.

The key reason for the same was that the Act does not indicate the quantifiable or measurable benefits to be provided in lieu of the levy. Further, prior sanction of the President of India was not obtained before the enactment of the said Entry Tax Act. The High Court held that since the state government failed to substantiate the compensatory nature of

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