Long awaited exemptions on Service Tax in Special Enterprise Zones (SEZs) have been postponed until after the elections to avoid undue influence on voters.
The Indian Election Commission has refused to allow the finance ministry to issue a notification allowing an exemption on Service Tax for businesses and developers operating in the SEZs, while elections are being held. Businesses affected will have to pay the service tax and claim refunds after the elections are over.
Initially, SEZ units and developers were exempted service tax on services provided in the SEZs, but were made to pay tax on services outside the zone, but it was later decided to extend the exemptions to services to SEZ businesses outside the zones, for example banking, courier and port handling services.
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