Where is place of provision

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CA Rajnish (Querist)
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22 April 2014 An India company engaged in Providing IT/Web Securities as follows:

Resources in India are accessing websites of Foreign companies through VPN(Virtual Private Network) or they are using remote access to monitor the websites of foreign Companies so as to prevent them from hackers and all.

Please tell me where is the Place of Provision of Services in this case. Please quote any case law or live case study so as to substantiate the same.

Sandeep Mangal Agarwal

Sandeep Mangal Agarwal (Expert)
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22 April 2014 Dear Rajnish ,

Rule 9 of the PoS Rules states that for the following services:

++ Services provided 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;

++ Service consisting of hiring of means of transport, up to a period of one month.

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

So in your query Indian company location is place of provision of Service.

Till now i am not aware of any case law on such case.

Thanks,

CA Rajnish

CA Rajnish (Querist)
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24 April 2014 Dear Sandeep,

Thanks for the clarification.

But still, a doubt is hovering around my mind.
As per the definition from Service Tax Provision “online information and database access or retrieval services” means providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;.

In this we are not providing mere data or information but we are performing some tests so as to check how much prone Clients/Customers' Database,websites etc are prone to hackers.

Should not Rule 4(a) be applied?? which says: The place of provision of following services shall be the location where the services are actually performed, namely:-
(a) 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:
Provided that when 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.

So in our case we are performing tests on websites/database by remote access from India but these websites/database must be located on servers which are outside India.

Please let me know if my understanding is wrong.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 You're on the right track with your understanding, and this is a nuanced area under the Place of Provision of Services Rules, 2012 (under the Service Tax regime prior to GST). Let’s break it down carefully:

🧩 Your Scenario in Summary:
An Indian company is providing web security / IT security services.

Work is performed remotely from India.

The assets (websites, servers, databases) are located outside India.

Clients are foreign companies.

⚖️ Relevant Rule under Place of Provision Rules:
✅ Rule 4(a):
“The place of provision of following services shall be the location where the services are actually performed, namely –
(a) services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service...”

Proviso: “...when 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.”

🔍 Interpretation:

“Goods” include tangible items, not websites or servers as "goods" in a conventional legal sense.

However, CBEC has clarified (via Education Guide 2012) that Rule 4 applies to tangible goods only.

Since you're working on intangible digital assets (like websites and data on foreign servers), Rule 4 is not applicable.

✅ Rule 3 (Default Rule):
“The place of provision of a service shall be the location of the recipient of service.”

This would apply if none of the specific rules (like Rule 4 or 9) apply.

✔️ Since your service is not intermediary, and not related to tangible goods, and the recipient is located outside India, Rule 3 applies here → Place of Provision = Outside India.

🧠 Clarification via CBEC Education Guide (2012)
Para 5.6.1 — If the service is performed remotely and does not involve physical goods, then Rule 4 is not applicable, and Rule 3 is to be applied.

This backs your understanding that remote testing of websites (non-tangible goods) would fall under Rule 3, placing the service at the recipient's location, i.e., outside India.

💡 Conclusion:
✔️ Place of provision is outside India.
✔️ Since payment is received in convertible foreign exchange, and service qualifies as an export of service, it is not taxable under Service Tax (as per Rule 6A of Service Tax Rules).
✔️ Rule 4(a) does not apply because your service is not in respect of tangible goods.

📁 You May Document This with:
Rule 3 of PoPS Rules, 2012

CBEC Education Guide (Para 5.6.1)

Rule 6A of Service Tax Rules for export qualification

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