Rule 13- Power to notify services or circumstances
3.11.1 What is the implication of this Rule?
This Rule states as follows:-
“In order to prevent double taxation or non-taxation of the provision of a service, or for the uniform application of rules, the Central Government shall have the power to notify any description of service or circumstances in which the place of provision shall be the place of effective use and enjoyment of a service.”
The rule is an enabling power to correct any injustice being met due to the applicability of rules in a foreign territory in a manner which is inconsistent with these rules leading to double taxation or double non-taxation. Due to the cross border nature of many services it is also possible in certain situations to set up businesses in a non-taxable territory while the effective enjoyment, or in other words consumption, may be in taxable territory. This rule is also meant as an anti-avoidance measure where the intent of the law is sought to be defeated through ingenious practices unknown to the ordinary ways of conducting business.
Rule 14- Order of application of Rules
1 What is the implication of this Rule?
Rule 14 provides that where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration.
This Rule covers situations where the nature of a service, or the business activities of the service provider, may be such that two or more rules may appear equally applicable.
Following illustrations will make the implications of this Rule clear:-
Illustration 1
An architect based in Mumbai provides his service to an Indian Hotel Chain (which has business establishment in New Delhi) for its newly acquired property in Dubai. If Rule 5 (Property rule) were to be applied, the place of provision would be the location of the property i.e Dubai (outside the taxable territory). With this result, the service would not be taxable in India.
Whereas, by application of Rule 8, since both the provider and the receiver are located in taxable territory, the place of provision would be the location of the service receiver i.e New Delhi. Place of provision being in the taxable territory, the service tax would be taxable in India.
By application of Rule 14, the later of the Rules i.e Rule 8 would be applied to determine the place of provision.
Illustration 2
For the Ms Universe Contest planned to be held in South Africa, the Indian pageant (say, located in Mumbai) avails the services of Indian beauticians, fashion designers, video graphers, and photographers. The service providers travel as part of the Indian pageant’s entourage to South Africa. Some of these services are in the nature of personalized services, for which the place of provision would normally be the location where performed (Performance rule-Rule 4), while for others, under the main rule (Receiver location) the place of provision would be the location of receiver.
Whereas, by application of Rule 8, since both the provider and the receiver are located in taxable territory, the place of provision would be the location of the service receiver i.e New Delhi. Place of provision being in the taxable territory, the service tax would be taxable in India.
By application of Rule 15, the later of the Rules i.e Rule 8 would be applied to determine the place of provision.
good illustration,