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Contents

PROVISION OF SERVICES RULES, 2012. 1

Service Tax Provisions in relation to holding of Book Exhibition: 1

Testing and certification services provided at different countries: 2

Service Tax provisions in relation to Online Banking & Information retrieval services. 2

Place of Provision in case of Architectural Services: 3

Services of Repairs are provided in a non taxable territory: 3

Provision of services between establishments of the same person: 4

 

PROVISION OF SERVICES RULES, 2012

 

Service Tax Provisions in relation to holding of Book Exhibition:

Red Chillies Limited, a company based out of UK has organized a book exhibition for Reader's Digest Ltd. a company based out of Germany. This exhibition is held in Mumbai on 17.03.2012. Red Chilies Ltd. provided services amounting to Rs. 15L and it invoiced the same on 07.04.2012 to Readers' Digest Ltd. which paid Rs. 14.5L as a full & final settlement to Red Chillies on 15.04.2012.

 

Analyze whether ST is payable. If yes, calculate the ST Liability.

 

Solution:

 

Determination of Place of Provision of Services:

 

General Rule to Place of provision of services (i.e. Rule 3) states that the services are deemed to be provided where the service receiver is located. Receiver's location will determine whether service is leviable to tax in the taxable territory. However, this rule is applicable only in cases where specific rules (Rule 4 to rule 14) do not apply.

 

In case of services relating to admission to or organizing 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 Rule 6 of the place of provision of services rules applies.

 

As per Rule 6, in case of services relating to organizing of an event or exhibition, the place of provision services will be the place where the event is actually held. Hence, here the place of provision of services is Mumbai (i.e. a taxable territory)

 

Determination of Point of Taxation:

 

In the given case the event is held on 17.03.2012. There is a change in the rate of service tax (from 10% to 12%) effective from 01.04.2012. Hence, Rule 4 of the Point of Taxation Rules applies.

 

As per Rule 4, where there is a change in the effective rate of tax, the point of taxation is determined as follows:

Where the service is provided before the change in effective rate of tax (i.e. in the given case 17.03.2012), the point of taxation is the earlier of:

 

Date of Invoice (i.e. 07.04.2012) OR

Date of Payment (i.e. 15.04.2012)

 

Therefore, in the given case the point of taxation will be 07.04.2012. and the rate of Tax will be 12%.

 

Calculation of Service Tax Liability:

 

Gross Amount Charged = Rs. 15,00,000/-

Amount received = Rs. 14,50,000/-

As per Section 67, Rs. 14,50,000/- will be the amount inclusive of service tax and hence, the Service tax liability will be calculated as [14,50,000*12.36/112.36] i.e. Rs. 1,59,505/-

 

Testing and certification services provided at different countries:

An Indian Firm provides a technical inspection & certification service for a newly developed bike which has to meet emission standards in different states or countries. The testing is carried out in Maharashtra (20%), Kerala (25%) and Colombo (55%).

 

Identify the place of provision.

 

 

Solution:

 

A per Rule 4 of the Place of Provision of Services, 2012, the place of provision of services in case of certain specified performance based services will be the place where the services are actually performed. Applying this Rule, in the given case the place of provision will be Maharashtra (taxable territory), Kerala (taxable territory) and Colombo (non taxable territory).

 

However, as per Rule 7, where services are provided at more than one location, the place of provision of services will the taxable territory where the greatest proportion of the service is provided. If we apply this rule, the place of provision becomes Kerala.

 

As per Rule 14, where the provision of services is determinable in terms of more than one Rule, the place of provision of services will be determined in accordance with the Rule that occurs latter.

 

Therefore, notwithstanding the fact that that the greatest proportion of a service rendered is outside the taxable territory, the place of provision of services in the given case is Kerala.

 

Service Tax provisions in relation to Online Banking & Information retrieval services

German Bank Ltd. Located in Germany provides online banking & information retrieval services to Tata Capital Ltd. It's a/c holder in India. It charges Rs. 1,50,000/- for the service for F.Y. 2012-13.

 

Explain with the help of relevant provisions whether it is liable to ST & If yes what will be its ST liability.

 

Solution:

 

As per Rule 9 of the place of provision of services rules, 2012, in case of services of online information and database access or retrieval services will be the location of the service provider.

 

Applying this rule, in the given case, notwithstanding the fact that the service receiver (Tata Capital Ltd.) is located in India, the place of provision of services will be Germany. Hence, there will no service tax liability arising on the given transaction.

 

 

1.  Determine the place of provision of services with the help of relevant provisions in the finance act in the following cases:

 

1. Abc Ltd, a goods transportation agency, based out of Mumbai, provides the service of transportation of goods by road to Delhi for Xyz ltd located in Nepal.

 

2. Neeta Travels having its Head office at Rajasthan provides bus service to a passenger who travels from Jammu & Kashmir to Kolkata.

 

3. Service of providing Movie - on - Demand, as an on board entertainment during the Bangkok - Jakarta leg of a Delhi-Kolkata-Bangkok-Jakarta flight

 

Solution:

 

1. As per Rule 10 of the Place of provision of services rules, 2012, the place of provision of services in case of goods transportation services by a GTA is the location of the person liable to Tax.

 

As per the notification no. 30/2012 in case of services of a GTA, the person liable to tax will be the recipient of the services. In the given case the service receiver is XYZ Ltd. who is located in Nepal.

 

Hence, in the given case the place of provision of services in the location of service receiver i.e. Nepal. Hence, the service will not be liable to service tax.

 

2. As per Rule 11, In case of passenger transportation services, the place of provision of services will the place from where the passenger embarks on the conveyance for a continuous service.

 

In the given case, notwithstanding the fact that Neeta Travels has its headquarters in Rajasthan and the journey ends at Kolkata, the place of provision of services will be Jammu & Kashmir. This is because the passenger starts for the journey at Jammu & Kashmir. Hence, there will be no service tax liability on this service.

 

3. As per Rule 12, in case of service provided on board of a conveyance, the place of provision of service will be the first scheduled point of departure of the conveyance for that journey.

 

Hence, in the given case irrespective of the fact that the service of movie on demand is provided during the Bangkok Jakarta Leg of the journey (both of which are not taxable), the service will be taxable since, the first scheduled point of departure for the flight is Delhi which is a taxable territory.

 

 

Place of Provision in case of Architectural Services:

An Architect based in Mumbai provides his service to an Indian Hotel Chain (which has a business establishment in New Delhi) for its newly acquired property in Dubai.

 

Solution:

As per Rule 5 of the Place of Provision of Services Rules, 2012, services provided directly in relation to immovable property including:

      i.        services provided by experts and estate agents

     ii.        provision of hotel accommodation by a hotel, inn or guest house

    iii.        club by whatever name called and includes grant of right to use immovable property

    iv.        service for carrying out nor co-ordination of construction work, including services by architects or interior decorators

the place of provision shall be Place where the immovable property is situated or intended to be located.

Therefore, by application of this rule, the place of provision of services in the given case shall be Dubai (i.e. non taxable territory) and hence no service tax is applicable.

However, as per Rule 8, where the provider and recipient of the service are located in a taxable territory, the place of provision of service will be the location of the Service Receiver. Therefore in this case the place of provision of service will be New Delhi and hence the service will be liable to Service Tax.

As per Rule 14, where the provision of services is determinable in terms of more than one Rule, the place of provision of services will be determined in accordance with the Rule that occurs latter.

Accordingly, the applicable Rule will be Rule 8 and thus the place of provision of service will be New Delhi and hence the service will be liable to Service Tax.

 

Services of Repairs provided in a non taxable territory:

A helicopter of Pawan Hans Ltd (India Based) develops a technical snag in Nepal. The engineers are deputed by Hindustan aeronautics Ltd. Banglore to undertake repairs at the site in Nepal. Will the services provided by engineers of Hindustan aeronautics Ltd. be liable to service tax?

Solution:

Rule 4 of Place of Provision of Services Rules, 2012 lays down that the place of provision of services in case of services provided in respect of goods that are required to be made physically available to the provider of service, will be the place where the services are performed. Therefore, the place of provision in the given case will be Nepal.

However, as per Rule 8, where the provider and recipient of the service are located in a taxable territory, the place of provision of service will be the location of the Service Receiver. Therefore in this case the place of provision of service will India and hence the service will be liable to Service Tax.

As per Rule 14, where the provision of services is determinable in terms of more than one Rule, the place of provision of services will be determined in accordance with the Rule that occurs latter.

Accordingly, the applicable Rule will be Rule 8 and thus the place of provision of service will be India and hence the service will be liable to Service Tax.

 

Provision of services between establishments of the same person:

Infosys Ltd. (India) provides certain services to Infosys Ltd. (USA). Can this be considered as Export of Services?

 

Solution:

 

As per Section 65B, an establishment of a person located in taxable territory and another establishment of such a person located in a non-taxable territory are treated as establishments of distinct persons.

 

However, as per Rule 6A of the Service Tax Rules, 1994, for a service to be treated as export of service, the service provider and service receiver should not be merely establishments of a distinct person in accordance to Section 65B.

 

Therefore, Rule 6A overrides the provisions of section 65B and thus, the above transaction cannot be termed as export of services.