Circular No.142/11/2011 - ST
F. No.354 /30 /2011-TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Tax Research Unit
North Block, New Delhi
18
th
May 2011
To
Chief Commissioners of Central Excise and Service Tax (All),
Director General (Service Tax),
Director General (Central Excise Intelligence),
Director General (Audit),
Commissioners of Service Tax (All),
Commissioners of Central Excise and Service Tax (All).
Madam/Sir,
Subject : SEZ - Service Tax Refund -- regarding.
Subsequent to the issuance of Notification 17/2011-ST dated 01. 03. 2011, representations have been received seeking
clarification on certain doubts. These doubts and clarifications are as follows:
QUESTIONS CLARIFICATIONS
1.
To claim the refund arising out of
service tax paid under section 66A,
no proforma is prescribed in the
notification; how to claim it?
In the notification, there is no difference in treatment of service tax paid under section
66 and section 66A of Finance Act, 1994. Where refund arises, Table - A, in Form A-2
can be used for making a refund claim.
2.
(i) In the notification, what is the
treatment for service tax paid on
taxable services which do not fall in
the category of "wholly consumed
services", and also are not 'shared
services' ? Is refund available?
(ii) Whether in the case of category
(iii) services referred in paragraph
2(a) of the notification,
'proportionate refund' applies to
only 'shared services' i.e. services
that are used both for SEZ (Special
Economic Zone) authorised
operations as well as DTA
(Domestic Tariff Area) operations?
All taxable services (under section 66 or section 66A) received by a SEZ
Unit/Developer for the authorised operations, have been exempted in the first
paragraph of notification 17/2011-ST, subject to conditions.
In Paragraph 2, conditions attached to this exemption are prescribed. In terms of
paragraph 2(a), refund route is the default option for all who intend to claim the
exemption granted by the notification in its first paragraph. However, an exception is
provided in the form of ab initio (upfront) exemption, to the 'wholly consumed' services.
Services which fall outside the definition of 'wholly consumed' services can be
categorized as those which are used exclusively by the SEZ Unit/Developer, for the
authorised operations in SEZ or shared with DTA operations.
Para 2(d) of the notification is applicable to refund arising from 'shared services' only.
Thus exemption to services exclusively used for the authorised operations of SEZ
Unit/Developer, will continue to be available by way of refund, as specified in paragraph
2(a) itself, subject to other conditions. To claim this refund, Table-A, provided in Form
A-2 may be used.
It is clarified that only such services shall be considered as exclusively used by SEZ
Unit/Developer, for the authorised operations, as they satisfy the following criteria:
(i) Invoice is raised in the name of the SEZ Unit/Developer or in the invoice, it
is mentioned that the taxable services are supplied to the SEZ Unit/Developer for the
authorised operations;
(ii) Such services are approved by the 'Unit Approval Committee(UAC)', as
required for the authorised operations;
(iii) Receipt and use of such services in the authorised operations are
accounted for in the books of accounts of the SEZ Unit/Developer.
3.
Meaning of the expression ' who
does not own or carry on any
business other than the operations
in the SEZ ' appearing in
paragraph 2(a)(iii) of the
notification, which creates a
difference between 'standalone'
and 'non-standalone' SEZ
Unit/Developer, may be clarified.
The expression refers to an entity which is carrying out business operations in SEZ and
also DTA. Merely having an office in the DTA for purpose of liaison/business
promotion, does not restrict a SEZ Unit from availing benefit extended to a standalone
unit.
4.
Whether Approval by UAC is
necessary, to claim benefit under
the notification?
Yes. Unit Approval Committee (UAC) of the SEZ determines goods and services
required for the authorised operations of a Unit/Developer, under the SEZ law. Hence
approval of the UAC is necessary for availing the notification benefit, on the taxable
services.
5.
(i) Does condition (c) prescribed in
paragraph 2 of the notification,
restrict the non-standalone
Units/Developers, from availing
upfront exemption for wholly
consumed services, which fall
under category (i) and (ii) of para
2(a) of the notification?
(ii) For whom and for what purpose,
Declaration in A-1 is required?
In respect of category (i) and (ii) services listed in paragraph 2(a), upfront exemption is
made available to all SEZ Units/Developers, who fulfill the conditions of notification;
only in the case of category (iii), difference is created between standalone and non-
standalone SEZ Units/Developers.
Declaration in Form A-1 is required to be produced, to a service provider, to claim
upfront exemption (after striking out the inapplicable portion). This is a one-time
Declaration. Original Declaration can be retained with the SEZ Unit/Developer for
business record or for production to the jurisdictional Central Excise/Service Tax
authorities, if need be, for any verification; a copy has to be retained by SEZ Specified
Officer; self-attested photocopies of the Declaration can be submitted to service
provider to avail upfront exemption, subject to fulfillment of other conditions mentioned
in the notification.
6.
Meaning of the expression "total
turnover" found in paragraph 2(d) of
the notification is not clear: whether
it refers to turnover of SEZ Unit or
the entity (including DTA and SEZ
Unit). This may be clarified.
Total turnover includes turnover of DTA Unit and also export turnover of SEZ Unit. This
is the way to calculate proportionate refund. Table-C in Form A-2, illustrates this
aspect.
7.
A Developer may not have export
turnover; therefore, he cannot get
refund of service tax based on the
formula provided for shared
services in paragraph 2(d) of the
notification: therefore, it may be
explained how a Developer can
claim exemption under the
notification?
Generally, SEZ Developers will be using category (i) services listed in paragraph 2(a),
relating to immovable property located within SEZ; upfront exemption is available for
these services, and category (ii) services, irrespective of whether the Developer is
standalone or not. As another option, refund route is also available. In the case of
category (iii) services if Developer is standalone, upfront exemption is available. If
Developer is not standalone, on service tax paid on category (iii) services, which are
exclusively used for the authorised operations in SEZ, he can avail exemption through
refund route. 'Exclusive use' explained in clarification for question No.2. may also be
referred in this connection.
8.
Whether proportionate amount of
service tax paid on shared services
that have not been refunded after
applying the formula in paragraph
2(d), shall be available to the DTA
Units of the entity as cenvat credit?
Yes. Available.
9.
Whether consolidated refund claim
under 17/2011-ST can be filed by
an entity having more than one SEZ
unit and a centralized service tax
registration.
If an entity is having multiple SEZ Units with a centralized service tax registration,
consolidated refund claim can be filed, provided separate accounts are maintained for
receipt and use of services for the authorised operations in SEZ Unit.
10.
Whether certified copies of
invoices can be used for claiming
refund, if originals are needed for
other statutory purpose; Whether on
the basis of single invoice, one can
claim proportionate refund for SEZ
Unit and balance as cenvat credit
In terms of the notification, original invoices are needed for claiming refund; after
receiving the refund, originals can be taken back on submission of copies certified by
Chartered Accountant. On a single invoice, if proportionate refund (by SEZ Unit) and
cenvat credit (by DTA Unit) needs to be obtained, then also similar system shall be
followed.
2. Trade Notice/Public Notice may be issued.
3. Field formations may be informed accordingly. Hindi version to follow.
(J. M. Kennedy)
Director, TRU
Tel : 011-23092634
