Service tax exemption to save R1,500 crore for SEZs annually

The finance ministry's recent decision to give upfront service tax exemption for all SEZ developers and units would mean additional savings of R1,500 crore for these units annually, as they no longer have to wait for refunds.The service tax incidence (the tax paid on input services) for SEZ developers and units is over R8,000 crore annually. Although the input service taxes are to be nullified in regard to these enclaves under the SEZ policy, the opaque refund system has practically led to some 20% of the claims getting indefinitely stuck with the authorities at any given time. Although the gain would be of R1,500 crore only, the new move would improve liquidity of the SEZ developers and units even more substantially as they don't have to pay the tax in the first place and wait for refunds.

Source : Financial Express