Point of taxation and taxble territory

This query is : Resolved

CA.Pravinchandra (Querist)
Follow

23 July 2012 If a chartered accounatant in INDIA gives advicory services to client, who is in London..This is export of service or outside taxable territory hence not Taxable. If the same client comes to INDIA and takes consultincy services from CA..(services provided within taxable territory)Will it be charged to service tax..?

Amol S Joglekar

Amol S Joglekar (Expert)
Follow

23 July 2012 In both the instances it is exigible to service tax. In the first case by reverse charge and in the second case direct charges. (Subject to however, the limit of 10Lakh)

CA.Pravinchandra

CA.Pravinchandra (Querist)
Follow

24 July 2012 But Amol Ji. Reverse charge is applicable on specified services right?

Upgrade to CAclubindia Pro. Subscribe Now!

CA.Pravinchandra

CA.Pravinchandra (Querist)
Follow

24 July 2012 Notification No. 28/2012-Service Tax, dated 20.06.2012. These Rules came into effect from 01.07.2012. These rules are meant for persons who deal in cross border services. These rules replaced the ‘Export of Service Rules, 2005’ and ‘Taxation of services (Provided from outside India and received in India) Rules, 2006. The service providers operating within India from multiple locations without having centralized registration will be found useful in determining the precise taxable jurisdictions applicable to their operation with the help of these Rules. The rules will be equally relevant for determining services that are wholly consumed within a SEZ, to avail the outright exemption.

A service should be taxed in the jurisdiction of its consumption. According to these Rules a place of provision of service shall be the location of the service receiver. In case the location of service receiver is not available in the ordinary course of business then the place of provision of service shall be the location of service provider. Rule 2(i) defines the terms ‘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.

For the purposes of Rule 2(h) and Rule 2(i), “usual place of residence” in case of a body corporate means the place where it is incorporated or otherwise legally constituted. . For the purpose of clause (i), in the case of telecommunication service, the usual place of residence shall be the billing address. The ‘telecommunication service’ is defined under Rule 2(q) that means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro-magnetic means but shall not include broadcasting services.

Therefore Service tax will not be attracted in my case. Am i right?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

10 August 2024 Let's break down your query about the applicability of Service Tax for advisory services provided by a Chartered Accountant (CA) based on the location of the service receiver and the place of provision of service.

### 1. Advisory Services to a Client in London (Export of Services)

**Scenario:**
- **Service Provider:** Chartered Accountant in India
- **Service Receiver:** Client in London
- **Nature of Service:** Advisory services

**Applicability of Service Tax:**
- Since the service is provided to a client located outside India, it qualifies as an **export of service** under the **Export of Service Rules, 2005** (now replaced by Place of Provision of Services Rules, 2012).
- **Export of Services** are considered **zero-rated supplies** under GST (earlier Service Tax provisions). Therefore, the service is **not taxable** under Service Tax in India, but the provider can claim a refund of any input tax credit (ITC) related to the exported service.

### 2. Advisory Services Provided in India

**Scenario:**
- **Service Provider:** Chartered Accountant in India
- **Service Receiver:** Client from London, taking services in India
- **Nature of Service:** Advisory services

**Applicability of Service Tax:**
- When the client comes to India and takes advisory services from the CA, the service is provided **within the taxable territory** of India.
- **Service Tax** is applicable in this case because the place of provision of service is within India.

### Taxation Based on Place of Provision Rules:

The **Place of Provision of Services Rules, 2012** dictate where the service is considered to be provided, which in turn determines the applicability of Service Tax.

- **Rule 2(i)** of the Place of Provision of Services Rules, 2012, specifies that the place of provision of a service is typically the location of the service receiver.
- For services provided to a non-resident or a foreign company and consumed outside India, it is considered an export of service and is zero-rated.
- If the service is provided to a non-resident but the service is used in India, then it is subject to Service Tax, as it is deemed to be provided within the taxable territory.

### Reverse Charge Mechanism (RCM):

- **Reverse Charge Mechanism (RCM)** applies to certain specified services when the service recipient is a registered person.
- For advisory services provided to a foreign client and consumed outside India, the reverse charge mechanism generally does not apply, as the service is exported.
- If the service is provided within India, the regular Service Tax rules apply unless specified otherwise.

### Summary:

- **For advisory services to a client in London (export of service)**: **Not taxable** under Service Tax; qualifies as a zero-rated supply.
- **For advisory services to a client from London within India**: **Service Tax is applicable** as the service is provided within the taxable territory.

**Note:** The information provided is based on Service Tax rules and their replacement by GST. For specific cases, especially with changes in tax laws, always consult a tax professional or legal expert.