Services provided by person located in a non- taxable territory - Service Tax Practice Manual / Ready Reckoner - Service Tax

Chapter 34 Services provided by person located in a non- taxable territory (w.e.f. 1st July, 2012) Scope of Exempt Service - Notification no. 25/2012 dated 20.06.2012 34. Services received from a provider of service located in a non- taxable territory by- ( a ) Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession; ( b ) an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or ( c ) a person located in a non-taxable territory; Meaning definitions: From 1.4.2012 to 31.3.2013 (K) charitable activities means activities relating to - ( i ) public health by way of - ( a ) care or counseling of ( i ) terminally ill persons or persons with severe physical or mental disability, ( ii ) persons afflicted with HIV or AIDS, or ( iii ) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or ( b ) public awareness of preventive health, family planning or prevention of HIV infection ( ii ) advancement of religion or spirituality ( iii ) advancement of educational programmes or skill development relating to,- ( a ) abandoned, orphaned or homeless children ( b ) physically or mentally abused and traumatized persons ( c ) prisoners or ( d ) persons over the age of 65 years residing in a rural area ( iv ) preservation of environment including watershed, forests and wildlife ( v ) advancement of any other object of general public utility up to a value of (a) eighteen lakh and seventy five thousand rupees for the year 2012-13 subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during 2011-12 (b) twenty five lakh rupees in any other financial year subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during the preceding financial year From 1.4.2013 - Notification No. 3/2013-ST, dated 1-3-2013 . (K) charitable activities means activities relating to - ( i ) public health by way of - ( a ) care or counseling of ( i ) terminally ill persons or persons with severe physical or mental disability, ( ii ) persons afflicted with HIV or AIDS, or ( iii ) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or ( b ) public awareness of preventive health, family planning or prevention of HIV infection ( ii ) advancement of religion or spirituality ( iii ) advancement of educational programmes or skill development relating to,- ( a ) abandoned, orphaned or homeless children ( b ) physically or mentally abused and traumatized persons ( c ) prisoners or ( d ) persons over the age of 65 years residing in a rural area ( iv ) preservation of environment including watershed, forests and wildlife . Amending Note: W.e.f. 1-4-2013, entry in (e) above had been deleted vide Notification No. 3/2013-ST, dated 1-3-2013 . Thus, this residual clause of general public utility for the purpose of charitable activities will not be in force. Thus, the benefit to charities providing services for advancement of any other object of general public utility upto ₹ 25 lakhs will not be available. However, the threshold exemption will continue to be available up to ₹ 10 lakhs. From 1.7.2012 to 29.1.2014 (s) governmental authority means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution ; From 30.1.2014 (s) governmental authority means an authority or a board or any other body; (i) set up by an Act of Parliament or a State Legislature; or (ii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution ] From 14.5.2015 65B (26A) Government means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder. From 1.7.2012 65B (31) local authority means- (a) a Panchayat as referred to in clause (d) of article 243 of the Constitution ; (b) a Municipality as referred to in clause (e) of article 243P of the Constitution ; (c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006; (41 of 2006.) (e) a regional council or a district council constituted under the Sixth Schedule to the Constitution ; (f) a development board constituted under article 371 of the Constitution ; or (g) a regional council constituted under article 371A of the Constitution ; 65B (35) non-taxable territory means the territory which is outside the taxable territory; Clarification by the Board ( Taxation Guide Guidance Note 7 Exemptions dated 20.06.2012) 7.11.17 I am resident in Jammu and Kashmir and planning to construct a property in Delhi. I have got the architectural drawings made from an architect who is also resident in Jammu and Kashmir. Am I liable to pay service tax on architect services? No. Even though the property is located in Delhi- in a taxable territory- your architect is exempt from service tax as both the service provider and the service receiver is in a non-taxable territory. 7.11.18 I am an individual receiving services from a service provider located in non- taxable territory, am I required to pay service tax? If you are using these services for industry, business or commercial purposes, you are required to pay tax under reverse charge, unless otherwise exempt or in negative list. If use is for other purposes, you are exempt from service tax.