CA Heena Gupta
Applicable from 01.07.2012, Section 66B of the Finance Act, 1994 provides that service tax shall be leviable on the value of service provided or agreed to be provided by one person to another within taxable territory. Thus, only services rendered in taxable territory is taxable. Hence, it is essential to determine the place where the services are provided or agreed to be provided.
Empowered by section 66C of the Finance Act, 1994, the Central Government has notified Place of provision of Services Rules, 2012 vide Notification No. 28/2012.
Rule 1 provides that these rules shall come into force on 01.07.2012.
Rule 2 provides definitions which are discussed at relevant places.
Rule 3:- Place of provision generally
Following other things should be kept in mind while applying this rule:
– Determining location of Service Recipient (Rule 2(i) of Place of Provisioning of Services Rules, 2012)
|Where service recipient has single registration||Location of premises which is registered|
|Where service recipient not covered above:|
|Service recipient has a business establishment||Location of such business establishment|
|Service recipient has fixed establishment other than business establishment, where services are used||Location of such fixed establishment|
|Where services are used at more than one establishment||Location of establishment which is most directly related to use of service.|
|Absence of such places||The usual place of residence of service recipient|
Similar rules are prescribed for determination of location of service provider under rule 2(h) of the POPS rules, 2012.
– Meaning of Ordinary course of business
It implies that the service provider need not make any extra efforts to determine the address of service recipient if in the normal course of business such address is not being obtained.
– Business Establishment
- Place where essential decisions regarding general management are adopted
- Place where administrative functions of business are carried out.
- Any organization can have only one business establishment.
- It can be head office or factory or workshop.
– Fixed Establishment
1. Place which has permanent presence of human and technical resources to provide or receive a service.
– Meaning of usual place of residence
|In case of body corporate||The place where it is incorporated/legally constituted|
|In case of individual||The place where the individual spent most of his time during the period in question.|
Rule 4:- Place of provision of performance based services
(a) Services in respect of goods that are required to be made physically available by the service recipient to the service provider, or to a person acting on behalf of service provider, for the provision of services.
(b)Services provided to an individual, either service recipient or a person acting on behalf of service recipient, which requires the physical presence of individual and the service provider at the time of performance of services.
Example: An IT firm located in Bangalore provides repair service in respect of software, to a company at its establishment in Malaysia by way of electronic means, the place of provision of service shall be Malaysia.
Rule 5:- Place of provision of services relating to immovable property
(a) Services provided by experts and estate agents
(b)Provision of hotel accommodation by a hotel, inn, guest house, club or campsite by whatever name called,
(c) Grant of rights to use immovable property i.e. renting
(d)Services for carrying out or co-ordination of construction work, including Architects or Interior decorators.
(a) Advice or information relating to land prices or property markets because they do not relate to specific sites.
(b)Services of a tax return preparer for making a return by using figures provided by a person in respect of rental income from immovable property as this service is not directly related to the immovable property.
(c) Repair and maintenance of machinery which is not permanently installed. This is a service related to goods.
Rule 6:- Place of provision of services relating to events
(a) Services by way of admission to an event
(b)Services by way of organization of an event
(c) Services ancillary to admission to such event
Rule 7:- Place of provision of services provided at more than one location
A coaching institute organizes a study tour to UK, US and India for its students. The study tour is for 10 days out of which 7 days are spent in UK and US. As per this rule, the place of provision of service would be India.
Rule 8:- Place of provision of services where provider and recipient are located in taxable territory
Rule 9:- Place of provision of specified services
(a) Services provided by a Banking company, or a Financial Institution or a Non- Banking Financial company, to account holders
- Rule 2(b) defines “Account” to mean an account which bears an interest to the depositor, and includes a non-resident external account and a non-resident ordinary account.
- Banking services provided to persons other than accountholders are not covered under this rule. E.g. place of provision of service of making DD for non-account holders would be as per rule 3.
- Place of provision of services to current accountholders are not covered here; they shall be covered under default rule 3.
- Further services to accountholders which bear interest can be categorized as follows:
|Services that are provided in the ordinary course of business||Services that are not provided in the ordinary course of business|
|POPS – As per Rule 9||POPS – As per Rule 3|
(b)Online information and database access or retrieval services
Rule 2(l) defines ‘online information & database access/retrieval services’ to mean providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network e.g. web based services like matrimony services, social networking sites, online subscription of newspapers, weather reports, etc.
Following are not covered:
1. Sale/purchase of goods etc. over the internet
2. Telecommunication services provided over the internet including fax, audio conferencing, video conferencing and telephony
3. A service which is rendered over the internet, such as architectural drawing or management consultancy through email
4. Repair of software, or of hardware, through the internet, from a remote location
(c) Intermediary services
– Rule 2(f) defines ‘intermediary services’ to mean a broker, any agent or any other person, by whatever name called, who arranges or facilitates a provision of a service(hereinafter called the ‘main service’) between two or more persons(it doesn’t include a person who provides service on his own account).
– Thus an intermediary is involved with two supplies at any time:
1. The supply between the principal and the third party, and
2. The supply of his own service (agency service) to his principal, for which a fee or commission is usually charged.
– Example : Travel agents and commission agents for services but not commission agents for goods
– This rule does not apply to the provider of main service.
(d)Services consisting of hiring of means of transport, up to a period of one month
– Rule 2(j) defines ‘means of transport’ to mean any conveyance designed to transport goods or persons from one place to another.
– Racing cars and containers are not means of transport.
– Example: A call centre of MNC(Haryana) has hired 20 Tata Sumos from Mr. A(Delhi) for a period of one month
POPS – Rule 9 shall be applicable, hence POPS shall be Delhi
If period of hire is more than one month
POPS – Rule 3 shall be applicable, hence POPS shall be Haryana
Rule 10:- Place of provision of Goods Transportation Services
Excluding service by mail or courier
Mr. X (Chennai) imported goods to Mr. Y (USA). Services of shipping company (USA) taken by Mr. X for bringing the goods to Gujarat Port. Here SP is Shipping Company (Outside Taxable Territory) and SR is Mr. X (Within Taxable Territory). Applying Rule 10, POPS shall be destination of goods i.e. Gujarat.
ABC, a GTA located in Delhi, transports a consignment of new motorcycles from the factory of XYZ Ltd.(Haryana), to the premises of Mr. A, a dealer of J&K. As per mutually agreed terms between ABC and XYZ, the dealer in J&K shall pay freight.
SP is ABC located in Delhi, SR is Mr. A located in J&K
Since Mr. A is not one of the specified categories of person as mentioned u/s 68(2), reverse charge mechanism is not applicable and hence the person liable to pay service tax is ABC, GTA.
Therefore POPS shall be location of ABC i.e. Delhi.
Rule 11:- Place of Provision of Passenger Transportation Service
It means a journey for which
– A single or more than one ticket or invoice is issued at the same time, either
üBy one service provider or
üThrough one agent acting on behalf of more than one service provider, and
– Which involves No Stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued;
It means a part of the journey that
– Begins where passengers embark or disembark the conveyance,or
Where it is stopped to allow for its servicing or refueling, and
– Ends where it is next stopped for any of those purposes;
It means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time.
All stopovers do not cause a break in continuous journey. Only such stopovers will be relevant for which one or more separate tickets are issued.
Rule 12:- Place of Provision of Service provided on board a conveyance
A video game or a movie-on-demand is provided as on-board entertainment during the Kolkata-Delhi leg of a Bangkok-Kolkata-Delhi flight.
As per Rule 12, POPS = First Scheduled point of journey= Bangkok (Outside Taxable Territory)- Service tax not leviable
Rule 13:- Power to notify description of services or circumstances for certain purposes
Rule 14:- Order of Application of Rules
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.
|Service Provider||Service Receiver|
|Within Taxable territory||Within Taxable territory|
Two Rules equally apply here:
Rule 5: POPS- Location of Immovable property- Outside Taxable territory- No Service tax
Rule 8: POPS- Location of Service Receiver- within Taxable territory- Service tax leviable
As per Rule 14, POPS shall be as per rule 8, i.e. Delhi (within taxable territory)
(Author can be reached at caheenagupta @ gmail.com)