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Place of provision of Services Rules, 2012

Arpit verma 
on 12 January 2016

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(Notified by Notification No. 28/2012-ST dated 20-06-2012)

Relevance of POPS Rules, 2012

As per provision of section 66B, a service is taxable only when it is provided or agreed to be provided in the taxable territory.

It is relevant to determine the place where a service shall be deemed to be provided (i.e. it is in taxable territory or not).

To avoid double taxation.

To ensure that no service is left untaxed.

[Taxable territory means territory to which the provisions of Chapter V of Finance Act, 1994 apply (i.e. Whole of India except J&K).]

Significance of POPS Rules, 2012

The persons for whom these rules are significant (i.e. meant) are:-

• Persons who deal in cross border services (Exporters and importers of service).

• Persons providing services in or receiving services from the State of Jammu & Kashmir.

• Persons operating within India from multiple locations, without having centralized registration.

• Persons providing services in or receiving services from Special Economic Zone.

Place of Provision of Service Rules, 2012

Short title, extent and commencement:-

• These rules may be called the place of provision of service rules, 2012.

• They shall come into force on 1st day of July, 2012.

Definitions

Place of Provision Generally:-

• The place of provision of a service shall be the location of the recipient of service.

• Provided that the location of service receiver is not available in the ordinary course of business, the place of provision shall be the location of the service provider.

Performance Based Services:-

• Services provided in relation to goods that are required to be made physically available. or

• Services which require physical presence of receiver or person acting on behalf of receiver.

The Place of Provision shall be the location where the services are actually performed.

• Provided that when such services are provided from a remote location by way of electronic means: - Location where goods are situated at the time of provision of services.

Note- Rule shall not apply in case of service provided in respect of goods that are temporarily imported into India for repairs, reconditioning etc.

Example:      

Miss A. used services of cosmetic or plastic surgery, from Miss B. who is a beautician at her (i.e. Miss A) premises, thus place of provision shall be the place where service is performed i.e. the premises of Miss. A in this case.

Services relating to Immovable property:-

Services provided directly in relation to immovable property: - Location where immovable property is located or intended to located.

Example :      

• Services supplied in the course of construction, reconstruction, alteration or maintenance, of any building or civil engineering work.

• Services of real estate agent, auctioneers, architects, engineers and similar experts or professional people, relating to land. This includes the management, survey of valuation of property.

Services relating to events:-

Services provided by way of admission to, or organization of, or 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, the place of provision shall be the place where event is held.

Example:-

An Indian fashion design firm hosts a show at Toronto, Canada. The firm receives the services of a Canadian event organizer. Any service provided in relation to this event, including the right to entry, will be non-taxable.

Services provided at more than one location:-

• Services specified under aforesaid rules i.e. Rule 4, 5, or 6 if provided at more than one location, then the place of provision shall be :-

• The location in the taxable territory where greatest proportion of service is provided.

Service Provider and Service receiver located in the taxable territory:-

• This rule covers situations where the place of provision of a service provided in the taxable territory may be determinable to be outside the taxable territory by applying one of the earlier Rules i.e. Rule 4 to 6 but the service Provider and Service Recipient are located in the taxable territory.

• This rule covers situations where the place of provision of a service provided in the taxable territory may be determinable to be outside the taxable territory by applying one of the earlier Rules i.e. Rule 4 to 6 but the service Provider and Service Recipient are located in the taxable territory.

Example:-

A helicopter of Pawan Hans Ltd (India based) develops a technical snag in J&K. Engineers are deputed by Hindustan Aeronautics Ltd, Bangalore, to undertake repairs at the site in J&K. The place of provision in this case shall be the location of recipient i.e. India in this case.

Specified Services:-

Following Services are covered under this:

• Services by a banking company, or a financial institution, or a non-banking financial company, to account holders.

• Online information and database access or retrieval services.

• Intermediary services.

• Services consisting of hiring of Means of Transport (other than aircraft and vessels) up to period of one month.

• The place of provision shall be the location service provider.

Example:-

Mr. X comes to a bank to prepare a draft in cash. In this case, service is provided to Mr. X who comes to the bank for availing the service and the location of Mr. X is not ascertainable in the ordinary course of business of banking, therefore the place of provision of service will be the location of the service provider i.e. The bank in this case.

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 goods.

• [Provided that the place of provision of services of goods transport agency shall be the location of the person liable to pay tax]

Example:-

ABC Ltd is manufacturer of motor vehicles who transport goods to a company in Canada through Aircrafts. The place of provision will be outside India. (i.e. Canada) hence non taxable.

Passenger Transportation Service:-

The place of provision shall be the place where the passenger embarks on a conveyance for continuous journey.

Example:-

Mr. A receives the services of Mr. B, an air travel agent and books two tickets. One ticket was from Delhi to Canada and the other from Canada to Delhi. The place of provision for 1st ticket will be Delhi, hence taxable and for the 2nd is Canada, hence non taxable.

Services Provided on board a conveyance :-

• 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.

• The place of provision shall be the first scheduled point of departure of that conveyance for the journey.

Example:-

A movie on demand is provided as on board entertainment during the Kolkata-Delhi leg of a Bangkok-Kolkata-Delhi flight to the travelers, the place of provision of this service will be Bangkok which is outside taxable territory, hence not liable to tax.

Power to notify description of services:-

• 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 services or circumstances in which the place of provision shall be :

• The place of effective use and enjoyment of a service.

Order of application of rules:-

• Where the provision of a service is, prima facie, determinable in terms of more than one rule.

• The place of provision shall be in accordance with the rule that occurs later among the rules that merit equal consideration.

Thank you,
Arpit Verma


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