PLACE OF PROVISION OF SERVICE RULES, 2012 – AN OVERVIEW.

[Mr. M. GOVINDARAJAN]

                        In exercise of the powers conferred by Section 66C(1) and Section 94 (2)(hhh) of Finance Act, 1994 the Central Government made ‘Place of Provision of Service Rules, 2012’ vide Notification No. 28/2012-Service Tax, dated 20.06.2012.   These Rules came into effect from 01.07.2012.  These rules are meant for persons who deal in cross border services.  These rules replaced the ‘Export of Service Rules, 2005’ and ‘Taxation of services (Provided from outside India and received in India) Rules, 2006.  The service providers operating within India from multiple locations without having centralized registration will be found useful in determining the precise taxable jurisdictions applicable to their operation with the help of these Rules.  The rules will be equally relevant for determining services that are wholly consumed within a SEZ, to avail the outright exemption.

                                A service should be taxed in the jurisdiction of its consumption.  According to these Rules a place of provision of service shall be the location of the service receiver.  In case the location of service receiver is not available in the ordinary course of business then the place of provision of service shall be the location of service provider. Rule 2(i) defines the terms ‘location of service receiver’ as-

(a).       where the recipient of service has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained;

(b).       where the recipient of service is not covered under sub-clause (a):

(i)         the location of his business establishment; or

(ii)        where services are used at a place other than the business establishment, that is to say, a fixed establishment elsewhere, the location of such establishment; or

(iii)       where services are used at more than one establishment, whether business or fixed, the establishment most directly concerned with the use of the service; and

(iv)       in the absence of such places, the usual place of residence of the recipient of service.

 For the purposes of Rule 2(h) and Rule 2(i), “usual place of residence” in case of a body corporate means the place where it is incorporated or otherwise legally constituted.  . For the purpose of clause (i), in the case of telecommunication service, the usual place of residence shall be the billing address.  The ‘telecommunication service’ is defined under Rule 2(q) that means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro-magnetic means but shall not include broadcasting services.

The following Rules deal with the various place of provision of services-

• Rule 4 – place of provision of performance of based services;\
• Rule 5 – place of provision of services relating to immoveable property;
• Rule 6 – place of provision of services relating to events;
• Rule 7 – place of provision of services provided at more than one location;
• Rule 8 -  place of provision of services where provider and recipient are located in taxable territory;
• Rule 9 – place of provision of specified services;
• Rule 10 – place of provision of goods transportation services;
• Rule 11 – place of provision of passenger transportation services;
• Rule 12 – place of provision of services provided on board a conveyance;

PLACE OF PROVISION OF PERFORMANCE OF BASED SERVICES:

                        The place of provision of following services shall be the location where the services are actually performed-

• Services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service.    When 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.  This will not be applicable to the service in respect of the goods that are temporarily imported  into India for repairs, reconditioning or re-engineering for re-export, subject to conditions as may be specified in this regard;
• Services provided to an individual, represented either as recipient of a service or a person acting on behalf of the recipient, which require the physical presence of the receiver or the person acting on behalf of the receiver, with the provider of provision of service.

PLACE OF PROVISION OF SERVICES RELATING TO IMMOVEABLE PROPERTIES:

                        The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

PLACE OF PROVISION OF SERVICES RELATING TO EVENTS:

                        The place of provision of services provided by way of admission to, or organization of, a cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission, shall be the place where the event is actually held.

PLACE OF PROVISION OF SERVICES PROVIDED AT MORE THAN ONE LOCATION:

                        Where any service (place of provision of performance of based services, place of provision of services relating to immoveable property, place of provision of services relating to events)  is provided at more than one location, including a location in the taxable territory, its place of provision shall be the location in the taxable territory where the greatest proportion of the service is provided.

PLACE OF PROVISION OF SERVICES WHERE PROVIDER AND RECIPIENT ARE LOCATED IN TAXABLE TERRITORY:

                        Place of provision of a service, where the location of the provider of service as well as that of the recipient of service is in the taxable territory, shall be the location of the recipient of service.  The terms ‘location of the service provider’ is defined under Rule 2(h) that means-

(a).    where the service provider has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained;

(b).    where the service provider is not covered under sub-clause (a):

 (i)     the location of his business establishment; or

 (ii)    where the services are provided from a place other than the business establishment, that is to say, a fixed establishment elsewhere, the location of such establishment; or

 (iii)   where services are provided from more than one establishment, whether business or fixed, the establishment most directly concerned with the provision of the service; and

 (iv)   in the absence of such places, the usual place of residence of the service provider.

 

PLACE OF PROVISION OF SPECIFIED SERVICES:

            The place of provision of following services shall be the location of the service provider:-

(a)  Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b)  Online information and database access or retrieval services;

(c)   Intermediary services;

(d)  Service consisting of hiring of means of transport, up to a period of one month.

For this purpose the “non-banking financial company” means-

(i)          a financial institution which is a company; or

(ii)        a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or

(iii)      such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette specify;

“Online information and database access or retrieval services” means providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;

                                The term “intermediary” means a broker, an 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, but does not include a person who provides the main service on his account.;

PLACE OF PROVISION OF GOODS TRANSPORTATION SERVICES:

                                The place of provision of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of the goods.  The place of provision of services of goods transportation agency shall be the location of the person liable to pay tax.

PLACE OF PROVISION OF PASSENGER TRANSPORTATION SERVICES:

                        The place of provision in respect of a passenger transportation service shall be the place where the passenger embarks on the conveyance for a continuous journey.  The term ‘continuous journey’ is defined vide Rule 2(d) as a journey for which a single or more than one ticket or invoice is issued at the same time, either by one service provider or through 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.

PLACE OF PROVISION OF SERVICES ON BOARD CONVEYANCE:

                        Place of provision of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.

                                Rule 13 gives powers to the Central Government to notify description of services or circumstances for certain purposes.   This rule provides that that in order to prevent double taxation or non taxation of the provision of a service, or for the uniform application of rule, the Central Government shall have the power to notify any description of service  or circumstances in which the provision shall be the place of effective use and enjoyment of a service.

Discussions to this article

[Pradeep Khatri]

Dear Sir,

Thanks for indepth analysis on the subject matter.

Best Regards,

Pradeep Khatri

[Joginder Pal]

It is good analysis of tis new provision and will help the people in large to understand and correctly follow the law. Thanks