In case of certain specified categories of services, the place of provision shall be the place where the services are performed. These are discussed in the following paragraphs.
1. What are the services that are provided “in respect of goods that are made physically available, by the receiver to the service provider, in order to provide the service”?- sub-rule (1):
Services that are related to goods, and which require such goods to be made available to the service provider so that the service can be rendered, are covered here. Examples of such services are repair, reconditioning, or any other work on goods (not amounting to manufacture), storage and warehousing, courier service, cargo handling service (loading, unloading, packing or unpacking of cargo), technical testing/inspection/certification/ analysis of goods, dry cleaning etc. It will not cover services where the supply of goods by the receiver is not material to the rendering of the service e.g. where a consultancy report commissioned by a person is given on a pen drive belonging to the customer. Similarly, provision of a market research service to a manufacturing firm for a consumer product (say, a new detergent) will not fall in this category, even if the market research firm is given say, 1000 nos. of 1 kilogram packets of the product by the manufacturer, to carry for door-to-door surveys.
Illustration 1
A foreign music troupe, undertaking a tour in four Indian cities, obtains the services f an Indian cargo handling firm to move its sound and music equipment between the four cities. The place of provision of this service is in the taxable territory, notwithstanding the location of the receiver.
Illustration 2
An Electrical engineering firm located in India deputes its engineers to undertake repairs at a hydel power plant in Bhutan (which is owned by say, Govt of Bhutan). Place of provision of this service will be Bhutan i.e outside taxable territory.Illustration 3
An airline company in India gets its aircraft repaired at a hanger at Mumbai airport, by engineers deputed by an overseas firm (say, Airbus, France) who travel from Toulouse, France to Mumbai for the purpose. The place of provision of this service is in the taxable territory, and more specifically, Mumbai.
3.2.2 What is the implication of the proviso to sub-rule (1)?
The proviso to this rule states as follows:-
“Provided further that where such services are provided from a remote location by way of electronic means, the place of provision shall be the location where goods are situated at the time of provision of service.”
In the field of Information Technology, it is not uncommon to provide services in relation to tangible goods located distantly from a remote location. Thus the actual place of performance of the service could be quite different from the actual location of the tangible goods. This proviso requires that the place of provision shall be the actual location of the goods and not the place of performance, which in normal situations is one and the same.
Following example will illustrate the implication of this proviso:-
An IT firm located in Bangalore provides repair service in respect of software, to an IT company at its establishment in Singapore by way of electronic means. The place of provision of this service will be Singapore. The position will remain the same even if the service receiving firm has its ‘business establishment’ in India, so long as the ‘location’ as determined under the rules is the Singapore establishment (more directly concerned with receiving service).
3 What are the services provided in conjunction with a supply of goods under another contract? – sub-rule (2)
Examples of such services, when provided under a separate contract are as under:-
• An erection and commissioning contract;
• An ‘annual maintenance contract’, bundled with the sale of goods (say, an electrical appliance or an electronic product);
4 What are the services that are provided “entirely or predominantly in the physical presence of an individual (the receiver)”?-sub-rule (3)
Certain services like cosmetic or plastic surgery, beauty treatment services, personal security service, health and fitness services, photography service (to individuals), internet café service, classroom teaching, are examples of services that require the presence of the individual receiver for their provision. As would be evident from these examples, the nature of services covered here is such as are rendered in person and in the receiver’s physical presence. Though these are generally rendered at the service provider’s premises (at a cosmetic or plastic surgery clinic, or beauty parlor, or health and fitness center, or internet café), they could also be provided at the customer’s premises, or occasionally while the receiver is on the move (say, a personal security service; or a beauty treatment on board an aircraft).
5 What is the significance of “..in the physical presence of an individual, whether represented either as the service receiver or a person acting on behalf of the receiver” in this rule?
This implies that while a service in this category is capable of being rendered only in the presence of an individual, it will not matter if, in terms of the contractual arrangement between the provider and the receiver (formal or informal, written or oral), the service is actually rendered by the provider to a person other than the receiver, who is acting on behalf of the receiver.
A company contracts with a fitness centre for 10 annual memberships, which are availed by the company’s senior executives. Here is a situation where the company is the receiver of the service, but the service is rendered to the executives, who are receiving the health service on behalf of the modeling agency. Hence, notwithstanding that the modeling agency does not qualify as the individual receiver in whose presence the service is rendered, the nature of the service is such as can be rendered only to an individual, thereby qualifying to be covered under this rule.
Illustration 1
A company contracts with a fitness centre for 10 annual memberships, which are availed by the company’s senior executives. Here is a situation where the company is the receiver of the service, but the service is rendered to the executives, who are receiving the health service on behalf of the modeling agency. Hence, notwithstanding that the modeling agency does not qualify as the individual receiver in whose presence the service is rendered, the nature of the service is such as can be rendered only to an individual, thereby qualifying to be covered under this rule.
Illustration 2
A modeling agency contracts with a beauty parlour for beauty treatment of say, 20 models. Here again is a situation where the modeling agency is the receiver of the service, but the service is rendered to the models, who are receiving the beauty treatment service on behalf of the modeling agency. Hence, notwithstanding that the modeling agency does not qualify as the individual receiver in whose presence the service is rendered, the nature of the service is such as can be rendered only to an individual, thereby qualifying to be covered under this rule.
