CONFERENCE ON INTERNATIONAL TAXATION

Organized By
Saturday
Hyderabad Sub-Chapter 23rd
March, 2013
of International Fiscal Association
Hyderabad
© Dr. Sanjiv Agarwal
1

Taxation of Cross Border Services
This Presentation Covers
 Overview of ‘service’ and issues in cross border services
 Legislative background
 Export of Services
 Import of Services
 Territorial concept
 Taxable territory
 Non- taxable territory
 Taxation of services in negative list regime
 Place of Provision of Services Rules, 2012
 Special Economic Zones
2

What is Service
‘Service' has been defined in clause (44) of the new section
65B and means –
 any activity
 for consideration
 carried out by a person for another
 and includes a declared service (66E)
3

'Service' does not include -
 any activity that constitutes only a transfer in title of goods or immovable
property by way of sale, gift or in any other manner
 a transfer, delivery or supply of goods which is deemed to be a sale of
goods within the meaning of clause (29A) of article 366 of the Constitution
 a transaction only in money or actionable claim
 a service provided by an employee to an employer in the course of the
employment.
 fees payable to a court or a tribunal set up under a law for the time being
in force
4

This scope shall not apply to –
a) functions performed by M.P., M.L.A., Members of Panchayats /
Municipalities who receive any consideration in performing the
functions of that office as such member; or
b) duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that
capacity; or
c) duties performed by any person as a Chairperson or a Member
or a Director in a body established by the Central Government
or State Government or local authority and who is not deemed
as an employee before the commencement of this section.
5

6
For the purpose of scope of service -
(a) an unincorporated association or a AOP and a member thereof shall be
treated as distinct persons;
(b) an establishment of a person in the taxable territory and any of his other
establishment in a non-taxable territory shall be treated as establishments of
distinct persons
(c) A person carrying on a business through a branch or agency or
representational office in any territory shall be treated as having an
establishment in that territory

7
The New Taxability Concept
Taxable
3.
Exemptions
(39)
1. Non -
Taxable
territory
(POPS)
2.
Negative
list (17)
SERVICE FOR A CONSIDERATION
E - MAGIC TEST
E: Employee
M: Money
A: Actionable claim
G: Goods
I: Immovable property
C: Court Fee
9DECLAREDSERVICES

Peculiar Features in Cross Border Services
 Service tax is a destination based consumption tax –
International practice
 Double taxation
 With export of services, taxes should not be exported
 Imports – taxed at the destination
 Incentivizing exports
 Special incentives – rebates, SEZ etc.
8

The concerns
 How to tax cross border services
 How to determine whether the transaction is export
 How to determine whether the transaction is import
 How to determine place of provision of services
 How to value the services so provided
 Availing tax exemptions / refunds
9

Legislative Background (prior to 1.7.2012)
 Taxable services provided in India were taxable except J&K
State –No concept of territory
 Tax on export of services governed by Export of Services Rules,
2005
 Tax on import of services governed by Taxation of Services
(Provided from Outside India and Received in India )Rules, 2006
 Refunds and rebates under various schemes
10

 Service Tax applicable on all taxable services under the jurisdiction
including import of services unless specifically exempt from the levy
of service tax.
 Such exemptions cover -
i) services rendered in the State of Jammu & Kashmir
ii) services provided to Special Economic Zones (SEZ) and units
in SEZ’s
iii) export of service
 If service is exported, no service tax is payable
11

Activities should be carried out by a person for another person (i.e.,
Service provider and service receiver)
 Both can be in same country (say, India)
 Both can be in foreign country (say, out of India)
 Both of them can be in different countries (say, one in India and
other outside India)
 Service provider in India, service receiver outside India ( Export of service)
 Service provider outside India, service receiver in India (Import of service)
12

 Export of services deemed to have taken place based on criteria for
export as per rule 3.
 For exports, services should be fully or partly performed outside
India.
 Categorization of services for exports:
• Immovable property criteria
• Performance based criteria
• Recipient / user based criteria
13

Immovable property criteria [Rule 3(1)(i)]
 Immovable property should be located outside India
 Services provided from India and used outside India
 Payment received in convertible foreign exchange
E.g. Indian architect prepares a design sitting in India for a
property located in U.K and hands it over to the owner of
such property
14

Performance Based Criteria [Rule - 3(1)(ii)]
• Services performed outside India, either wholly or partly.
• Services provided from India and used outside India
• Payment in convertible foreign exchange
E.g. An Indian event manager arranges a seminar for an Indian company in
U.K.; the service has to be treated used outside India on the basis of
performance in U.K even though the benefit of such seminar may flow
back to the employees serving the company in India.
15

Recipient Based Criteria [Rule - 3(1)(iii)]
 Services are provided in relation to business and commerce - recipient of service
should be located outside India;
 Services are not provided in relation to business and commerce - recipient of
service should be located outside India at the time of provision of such service.
 Services provided from India and used outside India (upto 28.2.2007)
 Services delivered outside India and used outside India (W.e.f 1.3.2007)
 Condition of used outside India deleted (W.e.f. 27.2.2010)
 Payment received in convertible foreign exchange
E.g. A company taking orders from domestic buyers for its principal in UK &
US for export of goods by principal in India on commission basis received in
convertible foreign exchange from its principal 16

Taxation of Cross Border
Services
Import of Services
 Taxable under section 66A w.e.f. 18.4.2006
 Conditions for taxation
 Service must be received by a person in India
 Service provider must be situated outside India
 Service falls under any clause of 65(105)
 Service provider has established business / fixed establishment /
permanent address outside India
 Taxation of Services (Provided from Outside India and Received in
India) Rules, 2006.
17

Import of Services
Categorization of services (Rule 3)
Immovable property criteria
Rule- 3(i) - Immovable property should be located in India.
Performance based criteria
Rule - 3(ii) - Services have been performed in India either wholly or
partly
Recipient based criteria
Rule - 3(iii) – The recipient of service should be located in India . The
service should be in relation to business or commerce. 18

Case laws -
 Bombay High Court in the case of Indian National Ship Owners Association
v. Union of India (2009) 18 STT 212 (2009) 13 STR 235 (Bombay) had held
that levy of service tax on a person who is resident of India but receives
services from outside India prior to insertion of section 66A is not
sustainable. In view of section 66A, offshore services cannot be subjected
to service tax prior to 18.4.2006. Before enactment of section 66A, there
was no authority vested by law in revenue to levy service tax on a person
who was resident in India and received services outside India.
 In Hindustan Zinc Ltd. v. CCE (2009) 18 STT 67; (2009) 18 STT 67
(CESTAT, New Delhi-LB), it was held that where taxable service is provided
by a non resident or from outside India, who does not have any office in
India, recipient of such service could not be held liable for paying service tax
prior to 1.1.2005 notwithstanding amendment in rule 2(1)(d) of Service Tax
Rules, 1994.
19

Charge of Service Tax ( Section 66B ) w.e.f. 1.7.2012
 Service tax shall be charge
 at the rate of twelve percent
 on the value of all services other than specified in the
negative list
 provided or agreed to be provided in the taxable territory
 by one person to another person
 Services that are provided in a non-taxable territory are not
chargeable to service tax
20

Up to 30.6.2012
Export of
Services
Rules, 2005
W.e.f. 1.7.2012
Rule 6A of
Services Tax
Rules, 1994
Place of
Provision
of Services
Rules,2012
+
21
Taxation of Cross Border Services –
Exports

 Rule 6A has been inserted in Service Tax Rules 1994 vide
Notification No. 36/2012-ST, dated 20.6.2012
 Rule 6A comprises what is export of services
 Service will be treated as export if —
(a) the provider of service is located in the taxable territory ,
(b) the recipient of service is located outside India,
(c) the service is not a service specified in the section 66D of the Act,
(d) the place of provision of the service is outside India,
(e) the payment for such service has been received by the provider of service
in convertible foreign exchange, and
(f) the provider of service and recipient of service are not merely
establishments of a distinct person.
22

Rule 6A of Service Tax Rules, 1994
 India + Indian currency = Taxable
 India + Foreign currency =Taxable
 Non-taxable territory + Indian currency = Taxable
 Non-taxable territory + Foreign currency = Export /
Exempt
23

How to Determine Taxability –
i) Which rule applies to the service provided specifically? In case more
than one rules apply equally, which of these come later in the order
given in the rules?
ii) What is the place of provision of the service in terms of the above
rule?
iii) Is the place of provision in taxable territory? If yes, tax will be payable.
If not, tax will not be payable.
iv) Is the provider 'located' in the taxable territory? If yes, he will pay the
tax.
v) If not, is the service receiver located in taxable territory? If yes, he
may be liable to pay tax on reverse charge basis.
vi) Is the service receiver an individual or government receiving services
for a non-business purpose, or a charity receiving services for a
charitable activity? If yes, the same is exempted.
vii) If not, he is liable to pay tax.
24

Place of Provision of Service Rules, 2012
 Purpose is to identify taxing jurisdiction for a service
 In earlier regime focus was to determine taxability in case of exports
and imports only.
 Present rules replace Export and Import Rules and define local
jurisdiction
 Meant for cross border services, services to J & K, service providers
operating from multiple locations, determining services wholly
consumed in SEZ and a precursor to GST.
25

Important Terms of POPS Rules, 2012
 Taxable Territory [Section 65B(52)] –Taxable territory means
the territory to which the provisions of this chapter apply.
(Taxable territory = India – J & K State)
 Non-taxable Territory [Section 65B(35)] – Non-taxable territory
means the territory which is outside the taxable territory.
26

27

Taxable Services to qualify as import if -
 Service provider located in Non-taxable Territory
 Service recipient located in Taxable Territory
 Import services from outside India - pay local
taxes on reverse charge mechanism
28

Location of service provider -
 Business establishment – Place where essential decisions concerning the general
management are adopted and functions of its central administration are carried out.
A service provider or receiver can have only one business establishment
 Fixed establishment -Place other than Business Establishment which has
permanent presence of human and technical resources to provide or receive service
 Usual place of residence –
Body Corporate : place where incorporated
Individual : place where he spends most of his time for the period in question or
where he lives with his family and is in full time employment. An individual cannot
have more than one place of usual residence.
29

Location of the service provider
(a) where the service provider has obtained a single registration, whether centralized or
otherwise, the premises for which such registration has been obtained
(b) where the service provider is not covered under sub-clause (a):
(i) the location of his business establishment; or
(ii) where the services are provided from a place other than the business
establishment, a fixed establishment elsewhere, the location of such
establishment; or
(iii) where services are provided from more than one establishment, whether
business or fixed, the establishment most directly concerned with the provision of
the service; and
(iv) in the absence of such places, the usual place of residence of the service
provider. 30

Location of the service receiver
(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, 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.
31

India [U/s 65B(27)]
(a) the territory of the Union according to Article 1 clauses (2) and (3) of the
Constitution;
(b) its territorial waters, continental shelf, exclusive economic zone or any other
maritime zone ;
(c) the sea-bed and the sub-soil underlying the territorial waters;
(d) the air space above its territory and territorial waters; and
(e) the installations, structures and vessels located in the continental shelf of India
and the exclusive economic zone of India, for the purposes of prospecting or
extraction or production of mineral oil and natural gas and supply thereof;
32

S. No. Conditions Tax Liability
1 Both service provider and service receiver
are in taxable territory
Service provider
2 Service provided from taxable territory in
non taxable territory except J & K
No tax (Export)
3 Service provided from non-taxable territory
(including J & K) in taxable territory
Service receiver (Import)
4 Both service provider and service receiver
are in non-taxable territory
No service / No tax
33

POPS - At a Glance
Rule Governing Situation Place of Provision of Service
3 General Rule
If recipient's location not available in the ordinary course of
business
Location of Service Receiver
Location of Service Provider
4 Service provided in respect of goods that are required to be
made physically available by the service receiver to the service
provider t o provide the service
When such services are provided from a remote location by
way of electronic means
This rule shall not apply in case of service provided in respect of
goods temporarily imported into India for repair or re-export.
Service provided entirely or predominantly in the physical
presence of an individual.
Location where service is performed.
Location where the goods are
situated at the time of provision of
service
Location where service is performed.
5 Immovable property based services provided directly in relation
to an immovable property (includes grants of right to use
immovable property, services for carrying out or coordination of
civil work)
Location or proposed location of
immovable property
34

POPS - At a Glance
35
6 Services in relation to an event Location of event
7
If services referred to in Rules 4, 5 &
6 provided in many locations,
including location in taxable territory.
Taxable territory in which greatest
proportion is provided
8
Where service provider and service
receiver located in taxable territory
Location of service receiver
9
Specified services of banking, online
data base, intermediary services and
hiring means of transport up to one
month.
Location of service provider
10 Goods transport service
Goods transportation agency
services
Destination of goods
Location of person liable to pay tax

POPS - At a Glance
11
Passenger transport services Where the passenger embarks on
the conveyance for continuous
journey
12
Services provided on board a
conveyance
First scheduled point of departure.
14
Order of application of rules Later rule to supersede.
36

Rule 3- Default Rule
 The main rule or default rule provides that a service shall
be deemed to be provided , where the receiver is located
 In case, when location of the service receiver is not
ascertainable, location of the service provider is the place
of provision of service
 This rule is applied when none of the other later rules
apply
37

Rule 3- Default Rule
38
‘A’
Service Provider
‘X’
Service Provider
‘B’
Service Receiver
‘Y’
Service Receiver
Taxable Territory Non- Taxable Territory
Taxablefor
A
Taxable for B
Not Taxable

Taxation of Cross Border
Services
Rule 4- Performance based services
Place of provision is the location where services are actually performed
Goods which are required to made physically available
Services involve movable objects or things that can be touched, felt or
possessed
Examples:
 Services in respect of goods to be physically made available by receiver
(repair, storage / warehousing, technical testing, dry-cleaning, cargo handling
etc).
 Plastic surgery, beauty treatment services, personal security services, health
and fitness services, photography services internet cafe services etc.
Contd……39

Rule 4- Performance based services
 Market research reports, CA reports do not fall under this rule
 Indian engineers going to US to repair a ship not taxable in India
 Foreign engineers coming to India to repair a ship – taxable in India
 Services provided from a remote location by electronic means –
where goods located at that time
 Not applicable when goods are temporarily imported into India for
repairs, reconditioning or reengineering for re-export
40

Rule 5-Services relating to Immovable Property
 Place of provision is where immovable property is located
 Applicable for services directly connected with immovable property.
 Immovable property not defined in the Finance Act, 1994.
 Immovable property shall include land, benefits to arise out of land, and
things attached to the earth, or permanently fastened to anything attached
to the earth. [ S. 3 (26) of the General Clauses Act, 1897]
 Definition is inclusive
 Properties such as buildings and fixed structures on land covered under
immovable property.
 The property must be attached to some part of earth even if under water.
Contd……41

Rule 5-Services relating to Immovable Property
Examples:
 Services in course of construction, alteration, repair, maintenance etc, of immovable
property
 Renting of immovable property
 Services of real estate agents, architects, engineers etc. relating to land, building or civil
engineering works
 Services connected with oil / gas / mineral exploration
 Surveying, property management services, hotel accommodation
 Lease, or a right of use, occupation, enjoyment or exploitation of an immovable property
 Real estate services in relation to the actual or proposed acquisition, lease or rental of
property, legal services rendered to the owner or beneficiary or potential owner or
beneficiary of property as a result of a will or testament 42

Rule 6- Service relating to Events
 Place of provision is the place where event is actually held
 Covers admission to events, organizing events and ancillary services relating to events
 Includes cultural, artistic, sporting, scientific, educational, entertainment event, or a
celebration or any other similar event
Examples
 Conventions
 Conferences
 Exhibitions
 Fairs , Seminars
 Workshops
 Weddings
 Sports
 Cultural Events etc. Contd……
43

Rule 6- Service relating to Events
 A management school located in UK intends to organize a road show in
Mumbai and New Delhi for prospective students. Any service provided by
an event manager, or the right to entry like participation fee for prospective
student will be taxable in India.
 An Indian fashion design firm hosts a show at USA. The firm receives the
services of a Canadian event organizer. The place of provision of this
service is the location of the event, which is outside the taxable territory.
Any service provided in relation to this event, including entry fee will not be
taxable.
 Provision of sound engineering for an artistic event is a pre-requisite for
staging of that event and should be regarded as a service ancillary to its
organization. A service of hiring a specific equipment to enjoy the event at
the venue, is ancillary to admission. 44

Rules 7- Services from Multi locations
 The place of provision shall be the location in taxable territory where greatest
proportion of service is provided.
 Service is performed at different locations like partly from Mumbai , partly from
New Delhi
 Where any service stated in 4, 5 and 6 is provided at more than one location
including a location in taxable territory and one or more location is outside taxable
territory
Example:
• Technical inspection and certification of a product by carrying out testing at two
locations in India and one outside India - Taxable in India where a higher stake is
involved.
45

Rule 8- Both service provider and service receiver located in taxable
territory
 Where service provider and service recipient is in taxable territory, the
location of service receiver will be the place of provision
 Even when the actual provision takes place outside taxable territory , it
will be taxable in India.
Example
• Indian plane needs repair while in US. Indian maintenance agency
sends its engineers to US for repairs or hires engineers in US to repair
the plane. This transaction will be taxable in India superseding earlier
clauses.
46

Rule 9 - Place of Provision in case of Specified Services
 The place of provision of service is location of service provider
 Specified services includes
 Banking service (to account holders)
 Online information and database access or retrieval
 Intermediary services
 Hiring of means of transport up to a period of one month
 Account means an account which bears an interest to the depositor.
 Services provided to holders of demand deposits, term deposits, NRE (non-resident
external) accounts and NRO (non-resident ordinary) accounts
 Services linked to or requiring opening and operation of bank accounts such as
lending, deposits, safe deposit locker etc.
 Transfer of money including telegraphic transfer, mail transfer, electronic transfer etc.
47

 Banking services provided to persons other than account holders will be covered under the
main rule (Rule 3- location of receiver).
 Services not covered under this rule
 financial leasing services including equipment leasing and hire-purchase;
 merchant banking services;
 Forex, broking, and purchase or sale of foreign currency, including money changing;
 asset management including portfolio management, all forms of fund management,
 pension fund management, custodial, depository and trust services;
 advisory and other auxiliary financial services including investment and portfolio research
and advice, advice on mergers and acquisitions and advice on corporate restructuring
and strategy;
 banker to an issue service.
 Contd……
48

Tax on Money Remittance (Circular No. 163 dated 10.7.2012)
 No service tax on foreign currency remitted to India from overseas
 Amount of remittance comprises money
 Service excludes money transactions
 Even fee for remittance is not taxable (POPS)
 Sender of money outside India - bank / company remitting located
outside India
 Fee charged by Indian bank - remitter located outside India (not
taxable as per POPS)
49

 Online information and database access or retrieval services are services in relation to
online information and database access or retrieval or both, in electronic form through
computer network, in any manner.
 Essentially delivered over the internet or an electronic network which relies on the
internet or similar network for their provision.
 Completely automated, and require minimal human intervention.
 Examples
i) online information generated automatically by software from specific data input by
the customer, such as web-based services providing trade statistics, legal and
financial data, matrimonial services, social networking sites
ii)digitized content of books and other electronic publications, subscription of online
newspapers and journals, online news, flight information and weather reports
iii)Web-based services providing access or download of digital content.
50

Online information and database retrieval does not includes –
 Sale or purchase of goods, articles etc. over the internet;
 Telecommunication services provided over the internet, including fax,
telephony, audio conferencing, and videoconferencing;
 A service rendered over the internet, such as an architectural drawing, or
management consultancy;
 Repair of software, or of hardware, through the internet, from a remote location;
 Internet back-bone services and internet access services.
Contd………
51

Intermediary means -
- broker,
- agent, or
- any other person, by whatever name called
- who arranges or facilitates a provision of a service
- between two or more persons
- but does not include a person who provides the main service on
his account
Contd……….52

Hiring of means of transport
 Land vehicles such as motorcars, buses, trucks;
 Vessels;
 Aircraft;
 Vehicles designed specifically for the transport of sick or injured persons;
 Mechanically or electronically propelled invalid carriages;
 Trailers, semi-trailers and railway wagons.
Non- transport means
 Racing cars;
 Containers used to store or carry goods while being transported;
 Dredgers, or the like. 53

Rule 10- Transportation of Goods
 Place of destination of goods
 Except in GTA by road where place of provision is location of person
liable to pay tax
Example -
GTA (ABC) located in Delhi transports a consignment of new
motorcycles from the factory of XYZ in Gurgaon (Haryana), to the
premises of a dealer in Bhopal, (MP). XYZ is a registered assessee
and is also the person liable to pay freight and hence person liable
to pay tax.
54

Rule 11 – Passenger Transportation Services
 Place where passenger embarks on conveyance for continuous journey
 Continuous journey means a journey for which:-
(i) a single ticket has been issued for the entire journey; or
(ii) more than one ticket or invoice has been issued for the journey, by one service
provider, or by an agent on behalf of more than one service providers, at the same
time, and there is no scheduled stopover in the journey
 Stopover means a place where a passenger can disembark either to transfer to another
conveyance or break his journey for a certain period in order to resume it at a later point
of time.
 All stopovers do not cause a break in continuous journey. Only such stopovers will be
relevant for which one or more separate tickets are issued.
Contd…..55

Rule 11 – Passenger Transportation Services
Example -
 A travel on Delhi-London-New York-London- Delhi on a
single ticket with a halt at London on either side, or even
both, will be covered by the definition of continuous journey.
 If a separate ticket is issued, New York-Boston-New York, the
same will be outside the scope of a continuous journey.
56

Rule 12- Services provided on board conveyances
 First scheduled point of departure of conveyance for journey
 On board service of provision of movies, music, games, beauty treatment etc.
Example –
 A video game or a movie-on-demand is provided as on-board entertainment
during the Kolkata-Delhi leg of a Bangkok-Kolkata-Delhi flight. POP will be
Bangkok (outside taxable territory, hence not liable to tax).
 If the same service is provided on a Delhi-Kolkata-Bangkok-Jakarta flight
during the Bangkok-Jakarta leg, POP will be Delhi in the taxable territory,
hence liable to tax.
57

Rule 14- Order of application of Rules
 Where more than one rule applies, rule
that occurs later is relevant rule
58

Exemptions under N. No. 25/2012-ST, dated 20.6.2012
Entry No. 31
 Services by an organizer to any person in respect of a
business exhibition held outside India
Entry No. 34
 Services received from a provider of service located in a non-
taxable territory by
(a) Government, a local authority, a governmental authority or an
individual in relation to any purpose other than commerce, industry or
any other business or profession; an entity registered under section
12AA of the Income Tax Act, 1961 for the purposes of providing
charitable activities; or
(b) a person located in a non-taxable territory
59

Rebate of inputs/input services for export of services (Notification
No. 39/2012-ST dated 20.06.2012)
 Rebate is granted of whole of duty paid on excisable inputs or whole of
service tax and cess paid on all input services used in providing
service exported
 Exported to any country other than Nepal and Bhutan
 Subject to conditions, limitations and procedure as prescribed in the
said Notification.
 Form ASTR-2 is to be used.
60

Rebate of Service Tax on the taxable service which are received by an
exporter of goods and used for exports of goods (Notification No.
41/2012-ST, dated 29.06.2012 )
 In suppression to Notification No. 52/2011-ST dated 30.12.2011
 Applicable w.e.f. 1.7.2012.
 Rebate shall be granted by way of refund of service tax paid on the specified services
 Specified services would mean —
(i) in the case of excisable goods, taxable services that have been used beyond the
place of removal, for the export of said goods;
(ii) in the case of goods other than (i) above, taxable services used for the export of
said goods;
but shall not include the following input services, viz, - construction, works contracts,
renting of motor vehicles, general insurance, servicing, repair & maintenance, outdoor
catering, health, life insurance etc. meant for employees etc.
Contd……61

Rebate of Service Tax on the taxable service which are received by an
exporter of goods and used for exports of goods (Notification No.
41/2012-ST, dated 29.06.2012)
 Rebate can be claimed on the basis of rates as mentioned in schedule
or as per procedure (Para 2) or based on documents (Para 3)
 Cenvat Credit of service tax paid on specified services used for export
of goods should not be taken.
 No rebate can be claimed under this notification by developer of SEZ or
unit in SEZ.
 If export proceeds are not received within time allowed or within
extended time, such rebate shall be deemed to have never been
allowed and shall be recovered back in terms of recovery provisions.
Forms used –
Form A1 – Application for claiming rebate of Service Tax on specified
services used for export of goods.
Form A2 – Declaration by exporter for obtaining Service Tax code.
62

Determination of point of taxation in case of specified services or
persons (Rule 7 of POT Rules, 2011)
 POT shall be the date on which payment is made
 When the payment is not made within a period of six months of the date of
invoice, the POT shall be determined as per normal provision
 In case of associated enterprises, where the person providing the service
is located outside India, POT shall be the date of debit in the books of
account of the person receiving the service or date of making the payment
whichever is earlier.
63

64
Special Economic Zone (SEZ)
 Specified duty-free zone deemed to be a foreign territory
 Objectives of promotion of goods and services leading to enhanced economic
activities, investment promotion, development of infrastructure, creation of
employment opportunities etc.
 SEZ's could be multiple product SEZ's, sector specific, IT sector, free trade and
warehousing, gem and jewellery sector, biotechnology etc.
 Enjoy tax benefits
 Indirect tax exemptions include customs duty, central excise duty, service tax,
central sales tax, stamp duty and other miscellaneous taxes and duties
 Direct tax exemptions include income tax, dividend distribution tax, securities
transaction tax, minimum alternate tax etc.

Special Economic Zone (SEZ)
 Every developer and the entrepreneur shall be entitled to exemption, drawback
and concessions (Section 26(e) of SEZ Act, 2005)
(e) exemption from service tax under Chapter V of the Finance
Act, 1994 on taxable services provided to a developer, or unit to carry on
authorized operations in the special economic zone
 Section 51(1) contains a non-obstante clause
 Rule 31 of SEZ Rules, 2006 - Exemption to SEZ / units in SEZ from Service Tax
on taxable services rendered to developer of SEZ / Units for authorized
operations
 In case of inconsistency between the provisions of the SEZ Act and any other law
in force, the provisions of the SEZ Act shall prevail
 W.e.f. 1.07.2012, the refund to SEZ will be granted under N. No. 40/2012-ST,
dated 20.06.2012
65

66
Exemption Status to SEZs

67

68

THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com
69

CONFERENCE ON INTERNATIONAL TAXATION

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CONFERENCE ON INTERNATIONAL TAXATION