NASSCOM welcomes the new notification on service tax refunds under the SEZ rules by the government. NASSCOM had earlier shared concerns on the refund formula being skewed for SEZs and we are appreciative of the fact that the government has considered the needs of the industry and addressed them through this notification.
The new notification will enable ease of doing business for SEZs through the following positive steps:
1. Upfront exemptions across all services exclusively used by SEZ units. This provision would enable at least 80% of services used by SEZs to be exempt from imposition of service tax . These would include services like leased line, telecom, manpower supply, software licensing, renting and maintenance etc.
2. Allow a consolidated filing for multiple SEZ units with a common service tax registration. This would help reduce the compliance burden on the SEZ units.
3. Availing of CENVAT credit for services where exemption or refund has not been claimed. Earlier there was an interpretation issue where if applied for refunds, it had to be compulsory for all services. This would enable companies with domestic operations to leverage CENVAT credit, instead of applying for refunds.
4. The skewed formula in the earlier notification has been corrected and concept of input service distribution will be used to calculate the refund.
Mr. Som Mittal, President, NASSCOM said, “We believe that the new rules will ensure a transparent, fair and timely exemption and refund process for the Industry operating in SEZs. We will work with the government and the field officers to ensure this is implemented in letter and spirit. While this circular will address future issues, we are confident that the CBEC will adopt a similar approach to address the long pending service tax refund claims of the industry”..
The government had earlier modified the circulars pertaining to taxation of R&D centres in India, and now this new notification on service tax refunds showcases the government’s continuous support and commitment towards the IT industry. This would help instil confidence and promote growth of the high value add export led IT industry.
The new notification will enable ease of doing business for SEZs through the following positive steps:
1. Upfront exemptions across all services exclusively used by SEZ units. This provision would enable at least 80% of services used by SEZs to be exempt from imposition of service tax . These would include services like leased line, telecom, manpower supply, software licensing, renting and maintenance etc.
2. Allow a consolidated filing for multiple SEZ units with a common service tax registration. This would help reduce the compliance burden on the SEZ units.
3. Availing of CENVAT credit for services where exemption or refund has not been claimed. Earlier there was an interpretation issue where if applied for refunds, it had to be compulsory for all services. This would enable companies with domestic operations to leverage CENVAT credit, instead of applying for refunds.
4. The skewed formula in the earlier notification has been corrected and concept of input service distribution will be used to calculate the refund.
Mr. Som Mittal, President, NASSCOM said, “We believe that the new rules will ensure a transparent, fair and timely exemption and refund process for the Industry operating in SEZs. We will work with the government and the field officers to ensure this is implemented in letter and spirit. While this circular will address future issues, we are confident that the CBEC will adopt a similar approach to address the long pending service tax refund claims of the industry”..
The government had earlier modified the circulars pertaining to taxation of R&D centres in India, and now this new notification on service tax refunds showcases the government’s continuous support and commitment towards the IT industry. This would help instil confidence and promote growth of the high value add export led IT industry.
