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Place of Provision of Services

PLACE OF PROVISION OF SERVICES

According to the Charging Section, Section 66B of the Finance Act, 1994, Service tax will be levied at the rate of 14% on the value of all services provided in the taxable territory. As per Section 65B (52), “taxable territory” means the territory to which the provisions of this Chapter apply. The provisions of this Chapter applies to the whole of India except the State of Jammu and Kashmir.

Place of Provision of Service is the determination of the place from where services have been provided for determining the taxability of such services. Therefore, with this intention the Place of Provision of Service Rules, 2012 were introduced and it came into force on 1st July, 2012. On its introduction, the following Rules were superseded –

  • The Export of Services Rules, 2005 governing export of taxable services from India, and
  • Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.

Main Rule or General Rule –

The main rule set out in Rule 3 of the Place of Provision of Services Rules, 2012 is that the place of provision of a service shall be the location of the recipient of service. This is also called the default Rule.

In case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the service provider.

Sec 2(h) of Place of Provision of Services Rules, 2012 defines the “location of service provider” as –

 (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.

Sec 2(i) of Place of Provision of Services Rules, 2012 defines the “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.

In the case of telecommunication service, the usual place of residence shall be the billing address of the service receiver.

The “usual place of residence” in case of a body corporate means the place where it is incorporated or otherwise legally constituted.

Place of Provision of performance based services –

As per Rule 4 of the Place of Provision of Service Rules, 2012, the place of provision of the following services shall be the location where the services are actually performed –

1. 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.

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.

Further his clause shall not apply in the case of a service provided in respect of goods that are temporarily imported into India for repairs and are exported after the repairs without being put to any use in the taxable territory, other than that which is required for such repair.

This clause would cover services like repairs, reconditioning, storage, warehousing, courier, cargo handling, technical testing, dry cleaning, erection commissioning, annual maintenance contract, etc.

2. Services provided to an individual, represented either as the recipient of 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 for the provision of the service.

Examples for this clause are Cosmetic surgery, beauty treatment, classroom teaching, personal security service etc.

Place of provision of services relating to immovable property –

As per Rule 5, 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 –

According to Rule 6, 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 referred to in rules 4, 5, or 6 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 –

As per Rule 8 of the Place of Provision Rules, 2012, if the location of the provider of service as well as that of the recipient of service is in the taxable territory, the place of provision shall be the location of the recipient of service.

Place of Provision of Specified Services –

Rule 9 of the Place of Provision of Service Rules, 2012 contains provisions for place of provision of specified services which shall be the place of location of service provider.

Place of provision of goods transportation services –

As per Rule 10, the place of provision of service in case of goods transportation will be the place of destination of the goods. This rule specifically excludes transportation of goods by way of mail or courier.

In the case of Goods Transport Agency, the place of provision of service shall be the location of the person liable to pay tax.

Goods Transport Agency means any person who provides service in relation to transport of goods by road and issues consignment note.

In case of goods transported other than by road, the Place of Provision of Service will be the place of destination of goods.

Place of provision of passenger transportation service.-

As per Rule 11, 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.

Sec 2(d) of Place of Provision of Service Rules, 2012 defines “continuous journey”-

“continuous journey” means 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 provided on board a conveyance –

Rule 12 of the Place of Provision of Service Rules, 2012 states that the 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.

In order to prevent double taxation or non-taxation of the provision of a service, or for the uniform application of rules, the Central Government shall have the power to notify any description of service or circumstances in which the place of provision shall be the place of effective use and enjoyment of a service.

Lastly, Rule 14 of the Place of Provision of Service Rules, 2012 provides that where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration.

Place of Provision of Services

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