The finance ministry has told the commerce ministry that services provided by hotels, hospitals or schools located in special economic zones would not constitute export of service and would be liable to service tax.
"It has been decided that the exemption from service tax for service exports will be restricted to actual export of services from the SEZ.
Any service which is consumed within the SEZs will not be considered as export and therefore will be liable to service tax," a finance ministry official told
Business Standard.
If an overseas company seeks a service from a unit located in a SEZ but the service is used within the SEZ then too the service would not be treated as an export. "The unit will be exempt from service tax if the service actually leaves the SEZ and