The phrase ‘provided by one person to another’ signifies that services provided by a person to self are outside the ambit of taxable service. Example of such service would include a service provided by one branch of a company to another or to its head office or vice-versa.
Are there any exceptions wherein services provided by person to the same person are taxable?
Yes. Two exceptions have been carved out to the general rule that only services provided by a person to another are taxable. These exceptions, contained in Explanation 2 of clause (44) of section 65B, are:
♦ an establishment of a person located in taxable territory and another establishment of such person located in non-taxable territory are treated as establishments of distinct persons. [Similar provision exists presently in section 66A(2)].
♦ an unincorporated association or body of persons and members thereof are also treated as distinct persons. [Also exists presently in the explanation to section 65].
Implications of these deeming provisions are that inter-se provision of services between such persons, deemed to be separate persons, would be taxable. For example, services provided by a club to its members and services provided by the branch office of a multi-national company to the headquarters of the multi-national company located outside India would be taxable provided other conditions relating to taxability of service are satisfied.
Who is a ‘person’? Is it only a natural person or includes an artificial or a juridical person?
‘Person’ is not restricted to natural person. ‘Person’ has been defined Section 65B of the Act. The following shall be considered as persons for the purposes of the Act:
♦ an individual
♦ a Hindu undivided family
♦ a company
♦ a society
♦ a limited liability partnership
♦ a firm
♦ an association or body of individuals, whether incorporated or not
♦ Government (Central and State Governments, will be separate persons) a local authority, or
♦ every artificial juridical person, not falling within any of the preceding sub-clauses.