Place of Provision of Service Rules 2012 CA Dhruvank P. Parikh 11/12/2013CA Dhruvank Parikh.

Place of Provision of Service Rules 2012

CA Dhruvank P. Parikh

11/12/2013

Relevance There shall be levied a tax (herein after referred to as Service Tax)

at the rate of twelve percent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. (Section 66B of the FA’1994)

In the earlier regime, cross border transactions were governed by Export/Import Rules which were broadly based on positive list approach.

Post 01/07/2012, both – Export as well as Import of Service Rules have been de notified and they have been replaced by “Place of Provision of Service Rules,2012” notified vide notification no. 28/2012-ST dated 20/06/2012.

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Person for whom these rules are relevant

Persons who deals in cross border services.Persons providing services in or receiving

services from the state of Jammu and Kashmir.Persons operating within India from multiple

locations, without having centralized registration.

Persons providing services in or receiving services from Special Economic Zones.

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CA Dhruvank Parikh

Rule 2 (h) & (i) : Definition The location of the service provider or the recipient shall be:(a) Where the service provider/receiver has obtained a single registration,

whether centralized or otherwise, the premises for which such registration has been obtained.

(b) If not covered as per (a) above: The location of his business establishment If the service is not provided or used at business establishment, then it

will be the location of the fixed establishment where the services are provided or used.

Where the services are provided/used from/at more than one establishment, whether business or fixed, the establishment most directly concerned with the provision of the service.

In absence of such places, the usual place of residence of the Service Provider/Recipient.

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How to determine Taxability?? Which rule applies to the service provided specifically? What is the Place of Provision as per the above rules ? Is the place of provision in taxable territory? If yes, tax will be

payable. If not, tax will not be payable. Is the ‘provider’ located in the taxable territory? If yes, he will

pay the tax. If not, the service receiver located in taxable territory? If yes,

he may be liable to pay tax on reverse charge basis. Is the service receiver an individual or government receiving

services for a non-business purpose, or a charity receiving services fro a charitable activity? If yes, the same is exempted.

If not, he is liable to pay tax.

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CA Dhruvank Parikh

Rule 3 : General Rule or Default Rule or Residuary Rule

Comes into effect only when a later specific rule is not applicable.

If the service falls within the ambit of this rule, the location of the service receiver will be the place of provision of service.

As per the proviso to Rule 3, 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.

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CA Dhruvank Parikh

Rule 4(a) : Services in respect of Goods

Services are 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.

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

Repairs, Reconditioning, Storage & Warehousing, Courier service, Cargo Handling Service, Dry cleaning, technicaltesting/inspection/certification etc.

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CA Dhruvank Parikh

Examples on Rule 4 (a)

A music troupe from France approached

Delhi Mumbai Bhopal Jaipur

Cargo Handling Firm - India

M/s. ABC Ltd. Mr. X

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CA Dhruvank Parikh

Proviso to Rule 4 (a)

1. Services provided from a remote location by way of electronic means – Place of provision shall be the location where the goods are situated at the time of provision of service.

Vadodara

USA11/12/2013

CA Dhruvank Parikh

Proviso to Rule 4 (a)

2. As per second proviso to Rule 4, the provisions contained in Rule 4 (a) shall not apply to in respect of goods whether temporarily imported in India for Repairs, Reconditioning or Reengineering for export subject to conditions as may be specified.

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CA Dhruvank Parikh

Rule 4 (b) : Services Provided in the Physical Presence of Individual :

• Place where Services are actually performed.

Services provided to an individual, represented either as the recipient of service or a person acting on behalf of the recipient, which requires the physical presence of the receiver or the person acting on behalf of the receiver, with the provider for the provision of the service

Mr. A - Bhopal Joins

Coaching class in

Vadodara

XYZ llc.Modeling

Agency - USA

A Beauty Parlour -

Vadodara Contracts

10 Models of

XYZ llc.11/12/2013

Rule : 5 – Services relating to Immovable Property

• Place of Provision is where the immovable property is located.

• Services provided directly in relation to Immovable Property.

Covers following services:• Services provided by experts

and estate agents.• Prov of Hotel Accommodation

by a hotel, inn, guest house, club etc.

• Grant of right to use • Architects or Interior

Decorators• Services for carrying out or

coordination of construction work.

11/12/2013 CA Dhruvank Parikh

CA Dhruvank Parikh

Example of Rule 5Services provided Directly in relation to Immovable Property

Renting of Immovable Property

Surveying of Land or Seabed Services connected with

oil/gas/mineral exploration relating to specific sites of Land or Seabed.

Services supplied in course of Construction, Reconstruction, alteration, Repair or Mant of any building or civil eng work.

Services provided indirectly in relation to Immovable Property Advice or information relating to

land prices or property markets as they do not relate to specific sites.

Service of a CA in calculating Tax Return from figures provided by a bus. In respect of Rental Income from Commercial Property.

Land or Real Estate Feasibility Studies

Repairs & Mnt. Of Machinery not permanently embedded to earth.

Agent Service arranging finance for property purchase.

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CA Dhruvank Parikh

Rule : 6 – Event related Services

• Services provided by way of Admission to, 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.

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Example of Rule : 6

Example of a Service ancillary to organization of an event.

Example of a Service ancillary to admission to an event.

Event related as service that would be treated as not ancillary to admission to an event

INDIA

CANADA


CA Dhruvank Parikh

Rule : 7 – Services provided at more than one location:

• Rule applicable only if Rule 4 , 5 or 6 applies.• When Service is provided at more than one

location including the location of taxable territory, the Place of Provision shall be the location of taxable territory where the greatest proportion of service is provided.

• Not intended to capture insignificant portion of service is rendered in any part of taxable territory.

• Very Dangerous Implication of this Rule.

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CA Dhruvank Parikh

Example of Rule – 7:

Gujarat Rajasthan

Colombo

20 % 25 % 55 %

Coaching Institute in India

7 Days in Germany

& UK

3 Days in

India

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CA Dhruvank Parikh

Rule : 8 – Both Service Provider & Service Receiver are located in India

• Place of Provision would be the location of service receiver.

Machinery in London belonging to

B Ltd.

Do Well Machinery - Vadodara

B Ltd. - Bangalore

Ask for Service

Service Provider

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CA Dhruvank Parikh

Rule 9 : Specified Services

Place of Provision shall be the Location of the Service Provider in following cases:

(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.

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CA Dhruvank Parikh

Examples :

Indian Film Producer

Uploadswww.films.com

Mr. Harry in USA

Downloads

Travel Agent or Recovery Agent Mr Sam in France

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Rule 9 (d) : Hiring of means of Transport up to a period of 1 month

• Very Dangerous implication of this rule.

• Place of Provision not dependent on location of means of transport.

• Depends on the location of the service provider.

Nepal

Mr. X - India

Mr. Y -Nepal Bhutan

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CA Dhruvank Parikh

Rule 10 : Goods Transportation Service

Other than by way of Mail or Courier Goods Transport Agency

XYZ - Vadodara GTA - ABC

DEF - MumbaiDEF - Jammu

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Rule : 11 – Passenger Transportation Services

• The Place of Provision is the Place where the passenger embarks on the conveyance for a continuous journey.

• Continuous Journey – A journey for which:(a) A single ticket has been issued for the entire journey; or(b) More than one ticket has been issued, by one service

provider or by an authorized agent, at the same time And there is no scheduled stopover between any legs

of the journey for which one or more separate tickets are issued.

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Example of Rule 11Sr. No. Journey Place of Provision Taxability

1. Mumbai - Delhi Mumbai Yes

2. Mumbai – Delhi –London – Delhi - London

Mumbai Yes

3. New York - Delhi New York No

4. Delhi – Jammu - Delhi Delhi Yes

5. Jammu – Delhi - Jammu Jammu No

6. (a) Delhi – Bangkok – Delhi(b) Bangkok – Kuwait - Bangkok

(a) Delhi(b) Bangkok

(a) Yes(b) No

7. (a) Delhi – Jammu(b) Jammu – Delhi

(a) Delhi(b) Jammu

(a) Yes(b) No

8. (a) Sydney – Mumbai – Sydney(b) Mumbai – Delhi(c) Delhi – Ahmedabad(d) Ahmedabad - Mumbai

(a) Sydney(b) Mumbai(c) Delhi(d) Ahmedabad

(a) No(b) Yes(c) Yes(d) Yes

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CA Dhruvank Parikh

Rule 12 : Services provided on board a Conveyance

• First Scheduled Point of Departure of that conveyance for journey

Price is included in Fare

Price is not

included in Fare

Rule 12 not applicable

Rule 12 is applicable

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CA Dhruvank Parikh

Rule 13 : Rule making Power

• This rule empowers the Central Government 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.

• Powers are granted to enable the Central Government to issue notifications to:

(i) Correct injustice on account of double taxation and

(ii) Curb the tax avoidance practices

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CA Dhruvank Parikh

Rule 14 : Order of Application of POPS Rules 2012

Where the provision of a service is, prima facie, determinable in terms of more than one rule, the rule that occurs later among the rules that merit equal consideration will be applicable for determining place of provision.

USA

Mr. X - India Owner

Mr. Y - India

11/12/2013

CA Dhruvank Parikh

Thanking You all

• CA Dhruvank Parimal Parikh• Naresh & Co• 9879939469• [email protected]/12/2013

CA Dhruvank Parikh

POINT OF TAXATION RULES 2011

CA DHRUVANK P. PARIKH

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CA Dhruvank Parikh

How & Why Point of Taxation?

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CA Dhruvank Parikh

Old provisions v/s. New provisions

Cash Accrual

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CA Dhruvank Parikh

Issue of Invoice – An important aspect

o Rule 4(A) (as amended) of Service Tax Rules 1994 prescribes the time limit of issue of invoice as follows:

Banking Company or a Financial Institution, including a NBFC 45 Days

Service Providers other than above 30 Days

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Rule – 3 : Determination of Point of Taxation:

Issue of Invoice

As per Rule 4A of ST Rules’94

Date of issue of Invoice

Date of Payment

Not as per Rule 4A of ST Rules’94

Date of Completion of Service

whichever is earlier


CA Dhruvank Parikh

Example : Sr No. Date of Provision /

Completion of Service


Date of Payment

Point of Taxation

1. 10/04/2013 30/04/2013 15/05/2013 ?????????????

2. 10/04/2013 30/04/2013 15/04/2013 ?????????????

3. 10/04/2013 12/05/2013 30/04/2013 ?????????????

4. 10/04/2013 30/04/2013 Part payment on 15/04/2013 and remaining on 10/05/2013

?????????????


?????????????


???????????????

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CA Dhruvank Parikh

Continuous Supply of Services???

• Provided or agreed to be provided continuously or on recurrent basis,

• Under a contract, for a period exceeding 3 months• With the obligation for payment periodically or

from time to time• Where the Central Government, by a notification

in Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition.

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CA Dhruvank Parikh

Defined Continuous Supply of Service

Service portion in execution of Works Contract Telecommunication Services

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CA Dhruvank Parikh

POT in case of CSS:

• In case of Continuous supply of service (CSS):Where the provision of whole or part of service is

determined periodically, on completion of an event in terms of a contract, and

The service receiver is required to make the payment to the service provider on completion of such an event,

• The date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service.

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CA Dhruvank Parikh

Example :

Stage Expected Date


Date of Payment

Amount (Rs.Lacs)

Deemed Date of Completion of Service

Point of Taxation

Initial / Booking

02/07/2013 02/07/2013 02/07/2013 45 02/07/2013 02/07/2013

50% comp of building

15/03/2013 22/03/2013 29/03/2013 180 15/03/2013 22/03/2013


20/06/2013 21/07/2013 25/07/2013 105 20/06/2013 20/06/2013


30/09/2013 20/10/2013 07/10/2013 120 30/09/2013 07/10/2013

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CA Dhruvank Parikh

Important Notes to Rule 3:

Completion of Service – Covers all auxiliary activities but doesn’t cover irrelevant grounds. Circular No. 144/13/2011-ST dated 18/07/2011

Small Advances up to Rs. 1,000/- not to change POT

Reminders issued by Insurance Companies – not regarded as issuance of Invoices. Circular No. 166/01/2013-ST dated 01/01/2013

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CA Dhruvank Parikh

Rule 2A : Date of Payment

Change in effective rate of Tax or Service is taxed for the first time.

Credit in the bank account is after 4 working days

Date of

credit in the

Bank Account

Date of accounting of payment

in the books

Date of actual

credit in the bank account

Whichever is earlier

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Example :

• An invoice of Rs. 15,00,000/- is issued for services on 01/06/2013

• A cheque for the same is received and accounted for in the books on 15/06/2013

• The amount of cheque was credited in the bank on 06/07/2013

• Meanwhile on 01/07/2013, the aforesaid service was brought in the ambit of taxable service. What will be the date of Payment?????

11/12/2013CA Dhruvank Parikh

CA Dhruvank Parikh

Rule 4 : Change in Effective Rate of Tax

Sr No.

Services Provided

Issue of Invoice

Receipt of Payment

Point of Taxation

1. Before After After Earlier of Date of Receipt of Payment or Date of Invoice

2. Before Before After Date of Invoice

3. Before After Before Date of Receipt of Payment

4. After Before Before Earlier of Date of Receipt of Payment or Date of Invoice

5. After Before After Date of Receipt of Payment

6. After After Before Date of Invoice

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CA Dhruvank Parikh

Rule 4 : Change in Effective Rate of Tax

In a nut shell, there are 3 following possible events in any transaction that one needs to find out/chart out to decide POT:

1. Completion of Provision of Service2. Date of Invoice3. Date of Payment Out of the above 3, happening / occurring of any 2

events before or after the change in effective rate of tax would be the deciding factor for POT.

Hence this rule is also popularly known as “2 by 3 Rule.”

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CA Dhruvank Parikh

Example : Change in effective rate of tax wef 01/04/2013

Sr. No.

Date of Provision of Service

Date of Invoice Date of Payment Point of Taxation

1. 25/03/2013 05/04/2013 08/04/2013 ???????????

2. 25/03/2013 25/03/2013 08/04/2013 ???????????

3. 25/03/2013 08/04/2013 30/03/2013 ???????????

4. 04/04/2013 28/03/2013 31/03/2013 ???????????

5. 04/04/2013 04/04/2013 31/03/2013 ???????????

6. 04/04/2013 31/03/2013 08/04/2013 ???????????

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CA Dhruvank Parikh

Poser

• ABC Airlines has issued a ticket on 25/03/2013 for travel to USA by executive class at Rs. 30000/-. The passenger Mr. P undertakes the journey on 05/04/2013. Rate of Service Tax is 10.30% up to 31/03/2013 and 12.36% thereafter. POT????

• Circular No. 155/06/2012-ST dated 09/04/2012.

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CA Dhruvank Parikh

Rule 5 : Service becomes taxable for the first Time

Invoice issued - Before

Payment received -

Before

Payment received -

Before

Issue of invoice – After but within 14

days

OR

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CA Dhruvank Parikh

Example : Service becomes taxable w.e.f 01/07/2013

Sr. No. Date of provision of

service

Date of invoice Date of Receipt of Payment as per

Rule 2A

Taxable

1. 01/06/2013 25/06/2013 30/06/2013 No

2. 01/06/2013 30/06/2013 05/07/2013 Yes

3. 30/06/2013 14/07/2013 30/06/2013 No

4. 01/07/2013 30/07/2013 15/07/2013 Yes

5. 15/06/2013 15/06/2013 30/06/2013 – part15/07/2013 – part

NoYes

6. 30/06/2013 16/07/2013 30/06/2013 Yes

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CA Dhruvank Parikh

Application of Rule 2A and Rule 5

• A Service provider provided service on 20/06/2013 for a value of Rs. 25,00,000/-. He issued invoice for the same and received payment by an account payee cheque on 30/06/2013 and the same was entered in the books on the same date i.e 30/06/2013. The cheque was deposited in the bank on 04/07/2013 and the same was credited in his bank account on 06/07/2013. The said service was leviable to tax wef 01/07/2013. Whether he is liable to pay tax??????

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CA Dhruvank Parikh

Rule 7 : Reverse Charge Mechanism

Payment is made within a period of 6 months

•Date on which payment is made

Payment is not made within a

period of 6 months

•Rule 3 will be applicable

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Rule 7 : Associated Enterprise

• Person providing service is located outside India, the Point of Taxation shall be:

Date of Debit in the books of

accounts of the person receiving

the service

Date of making the Payment

OR



CA Dhruvank Parikh

POT ???

• A person imported/received some services into India from a foreign vendor to whom $10000/- is paid and the following are the worth noting events in that connection:

Services received in India – 31/12/2012Date of Invoice – 31/03/201350 % Payment made – 30/09/2013Rest payment made – 31/10/2013

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Rule 8 : Copyrights, Trademarks, Designs, Patents etc.

• Whole Amount of consideration is not ascertainable at the time of performance of Service and subsequently the use of these service gives rise to any payment of consideration:

• Service shall be treated as having been provided each time when:

An invoice is issued by the

provider

Payment is received by the

provider

OR



CA Dhruvank Parikh

Example:

• M-series ltd. is having a copy right of classical songs of Yo Yo Honeysingh.

• M-series ltd. gave these rights to Z-series ltd on 20/04/2011.• The consideration payable by Z-series ltd. for acquiring the

copyright has been fixed @ Rs. 10 per CD sold by it.

FY CD’s sold Consideration Date of Invoice Date of Payment

2011-12 8 Lacs Rs. 80 Lacs 29/07/2012 16/08/2012

2012-13 6 Lacs Rs. 60 Lacs 03/06/2013 23/05/2013

2013-14 7 Lacs Rs. 70 Lacs 16/06/2014 16/06/2014

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CA Dhruvank Parikh

Rule 8A : Best Judgment Assessment

• If the relevant POT cannot be determined due to non availability of invoice or Date of Payment, than the CEO shall:

Call of such documents as deemed necessaryGive an opportunity of being heardDetermine the POT vide an order in writing to

the best of his judgment.

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CA Dhruvank Parikh

CENVAT Credit vis-à-vis POT:

• Till 01/04/2011, ST was payable on receipt basis. Hence even the ST credit was available on Payment basis.

• But what should be after introduction of POT???

• Rule 4 (7) of CCR amended.

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CA Dhruvank Parikh

A foremost challenge

• No similar conditions under all the Indirect Taxes.

• A challenge to the Central Government to bring all the indirect taxes under a single umbrella of GST.

11/12/2013

Place of Provision of Service Rules 2012 CA Dhruvank P. Parikh 11/12/2013CA Dhruvank Parikh.

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