POPOS Rules Overview

Ghalla & Bhansali, Chartered Accountants
1
PRESENTATION BY - RAJ MUKESH KHONA
PLACE OF PROVISION OF
SERVICE RULES, 2012
BY RAJ MUKESH KHONA
PLACE OF PROVISION OF SERVICE RULES, 2012

Charging Section [Section 66B]
2
Service Tax shall be
levied on
Value of all services
Provided or agreed to
be provided
In a taxable territory
Other than services
specified in negative list

What is Taxable Territory?
 Taxable Territory has been defined in section 65B(52) as a territory to
which provisions of Chapter V of Finance Act, 1994 apply.
 As per Section 64(1) of the Finance Act, 1994 provisions of Chapter V of
Finance Act, 1994 extends to the whole of India except the state of Jammu
& Kashmir.
 Thus, Jammu & Kashmir is a non-taxable territory.
3
India J & K
Taxable
Territory

What is India?
4
Land
Part
Territorial
Waters
(12nms)
Exclusive
Economic
Zone
(200nms)
India
Air Space,
Water, Sea
Bed
Continental
Shelf and Oil
Rigs

Helicopter View - Charging Section
5
Service Tax
shall be
levied @
Basic Rate of
14%
Gate No.1
(Entry)
Gate No.2
(Exit)
Gate No.4
Gate No.5
(Exit)
Gate No.3
(Exit)
Other than Negative
Listed Services
Provided / agreed to be
provided in Taxable
Territory
By one person to
another person and
collected in prescribed
manner
Exempted Services
Value of All Services
As per POT
Rules, 2011
and STR,
1994
19 Specified
Services
Determined
as per
POPOS
Rules, 2012
As per MEN
25/2012-ST

Test to Determine a Taxable Service
6
Doing an activity
including activity
under Declared
Service?
Doing such
activity for
Consideration?
Does this activity
consist only of
transfer of title in
goods or
immovable
property?
Is this activity
considered as
deemed sales?
Is service
performed by MP,
MLA or MLC?
Is the
consideration for
the activity in the
nature of fees for
a court or
tribunal?
Is such an activity
in the nature of
service provided
by employee in
course of
employment?
Does this activity
consists only of a
transaction in
money or
actionable claim?
Considered
as a Service
Service Provided
or Agreed to be
provided in
Taxable Territory
Service does not
fall in Negative
List
Service is a
Taxable
Service
Yes Yes No
No
NoNoNo
Yes Yes Yes
No

Introduction to POPOS Rules, 2012
7
 Service tax is a destination based consumption tax.
 Services to be taxed in the place of their consumption.
 Challenge to ascertain the place of consumption of services. Reasons being –
- Intangible nature of services.
- Non availability of exact location of service receivers.
- Existence of variety of services.
- Multiple mechanisms to deliver / render services.
 Hence, need for deeming provisions to determine exact place of consumption
of service aroused.
 Accordingly, Central Government has introduced Place of Provision of
Service Rules, 2012 vide Notification No. 28/2012-S.T. dated 20-06-2012 for
the purpose of determination of the place of provision of services.

Relevance of POPOS Rules, 2012
8
Taxation of cross-border services
Taxation of services provided to & from Jammu and Kashmir
Taxation of services provided to & from SEZs, to avail exemptions
Taxation of services provided from multiple locations
Harmonization with international practices, avoid double taxation &
ensure that no service is left untaxed

Framework of POPOS Rules, 2012
9
Central
Government
empowered to notify
rules u/s 66C for
determining POP of
service.
Simple set of 14
Rules notified by
the Central
Government vide
Notification No.
28/2012-S.T. dated
20-06-2012.
Statutory
Provisions
POP of service is in
taxable territory.
‘Service is
taxable’
POP of service is in
non-taxable
territory.
‘Service is not
taxable’
Basic
Philosophy

Determination of Location of Service
Provider and Service Receiver
10
Whether registered in
India? (Single or
Centralized)
Whether person has a
business establishment in
India?
Whether person has a fixed
establishment in India?
Registered Location in
India
Whether person has a fixed
establishment abroad?
Whether person has
another fixed
establishment
abroad?
Location will be the
establishment most directly
concerned
Business Establishment
establishment most directly
concerned
Location will be the Fixed
Establishment in India
Whether person has usual
place of residence in India?
Location in India
Y
N
N
N
Y
Y
Y
Y
Y
N
N
Place of Residence abroadN

Understanding Key Terms
11
Business
Establishment
 Place where essential decisions & functions
concerning the general management of the
business are taken and carried out.
 For instance, head office, factory, shop or retail
outlet.
 There is only one business establishment that a
service provider or service receiver can have.
Fixed
Establishment
 Place (other than the business establishment)
which has the permanent presence of human and
technical resources to provide / receive a service.
 In a nutshell, three P’s determine a ‘fixed
establishment’: (i) place (ii) people (iii) with a degree
of ‘permanence’.
 Temporary presence of staff by way of a short visit
at a place cannot be called a fixed establishment.

Understanding Key Terms
12
Usual Place of
Residence
 In case of Body Corporate – Place of Incorporation.
 In case of Individual – Place where he & his family
resides.
 In case of Telecommunication Service - Billing
Address of service receiver.
Establishment
most directly
concerned
 Determination of which establishment is most
directly concerned with the provision of service shall
depend upon facts and supporting documents of
each case.
 Following aspects should be considered -
- Invoice / Contract / Payment
- Debit to Accounts (Bearing of Cost)
- Actual Performance/Consumption of the Service

Grouping the POPOS Rules, 2012
13
Specific
Rules
General
Rule
Other
Aspects

Order of Applicability of Rules
Rule 14: Tie Breaker Rule
14
If a service
falls
Under
more than
one rule
Later Rule
to apply

Rule 3: General / Default / Main Rule
15
Service Description Place of Provision Illustrative list of services
All services which are not
falling in the specific rules
4 to 12
Location of Service
Receiver
• Consultancy Services
• Auditing Services by C.A.
Where location of service
receiver is not available in
the ordinary course of
business
Location of Service
Provider
• Restaurant Service
• Services of Palmist
Exception to Rule 3
In nutshell, unless otherwise specified, in case of:
- B2B Transactions - PoP shall be location of service receiver
- B2C Transactions - PoP shall be location of service provider

Pictorial Depiction of Rule 3
16
ABC
Service Provider
DEF
Service Receiver
XYZ
Service Provider
PQR
Service Receiver
Taxable Territory Non Taxable Territory
T
T
NT
T = Taxable NT = Not Taxable

Lets understand with an example
17
Mr. Akshay
USA
India
Mr. Anurag
Provides Consultancy Service

18
Mr. Yogesh
China
India
Taj Hotel
Comes to India for Holiday
Restaurant Services
Exception to
Rule 3

19
Mr. Siddhant
Bangladesh
India
Ms. Pooja
Provides Service of Palmist Exception to
Rule 3

Rule 4: Performance Based Services
20
a) Work upon Goods
Services performed on
goods made physically
available by the recipient
to service provider or
person acting on his
behalf
Location where
services are actually
performed
• Repairs & Maintenance
• Technical Testing
• Dry Cleaning
b) Work upon
Individuals
Services performed on
individuals which require
physical presence of
service receiver or person
acting on his behalf
• Cosmetic Surgery
• Beauty Treatment
• Classroom Teaching

Rule 4: Performance Based Services
21
Services provided
electronically from a
remote location
Location of goods at
the time of
provision of service
• Repair or Maintenance of
software through team-viewer
Services provided in
respect of goods
temporarily imported
into India for repairs
and are exported after
the repairs without
being put to any use in
the taxable territory,
other than that which
is required for such
repair
Location of Service
Receiver
Rule 4 shall not be
applicable
i.e. Rule 3 shall be
applicable
• Foreign Aircraft / Machinery
brought into India for repair
& exported w/o being put to
use in taxable territory
Exception to Rule 4 (a) – Work upon Goods

22
Machinery of
USA based Co.
USA
India
Mr. Aditya
Goes to USA to repair the machinery

23
Pooh Beauty
Parlour
USA
India
Ms. Palak
Ms. Palak
Goes to USA
Beauty Treatment

Rule 5: Services Relating to Immovable
Property
24
Services directly
related to Immovable
Property
Place where the
immovable property
is actually located or
intended to be
located
• Real Estate Agent
• Renting / Leasing
• Architect and Civil Engineers
• Hotel Accommodation
• Interior Decorator
Points for Ponder:
Rule 5 not applicable if there is only an indirect relation with the
immovable property. For example – Tax Consultancy, Financing Services
in relation to Immovable Property

Rule 6: Services Related to Events
25
Services provided by
way of:
• Admission to event
• Organization of event
• Services ancillary to
admission or
organisation of event
Place where the
event is actually held
[Events can be
Cultural, Artistic,
Sporting, Scientific,
Educational or
Entertainment]
• Event Management
Services for a Fashion
Show
• Sound engineering services
for Arijit Singh Concert

26
Canadian Event
Organizer
USA
India
Indian Fashion
Design Firm
Fashion Show
Hosts a
show
Event Management Service

Rule 7: Services provided at Multiple
Locations
27
Service Description Place of Provision
Services provided at more
than one location,
including a taxable
territory (overrides Rule 4,
5 & 6)
Location in the taxable territory where greatest
proportion of the service is provided

28
ABC Ltd
India
Sri Lanka
PQR Ltd
Technical inspection services of a product
40%
25%
20%
15%
Colombo
Mumbai
Goa
Jaipur

Rule 8: Service Provider and Service
Receiver both in Taxable Territory
29
Situations when both service
provider and receiver are located in a
taxable territory
Location of Service Receiver
Location of SP Location of SR PoP as per R.4 - 6 PoP as per R.8
Taxable
Territory
Taxable Territory Non Taxable
territory
Location of SR
Non Taxable
territory
Non Taxable
territory
Taxable Territory Exempt as per
Entry No. 34(c) of
Mega Exemption
Notification
Analysis of Rule 8

Krutika
Aeronautics Ltd
Nepal
India
Pawan Hans Ltd
Helicopter repair services
Nepal
30

Krutika
Aeronautics
Ltd
Nepal
India
Pawan Hans Ltd
Helicopter repair services
Sikkim
31
Service would be Exempt by virtue of Entry No. 34 of Mega
Exemption Notification No. 25/2012-ST dated 20.06.2012.

Rule 9: Specified Services
32
Services provided by a
banking company,
financial institution or a
non-banking financial
company to an ‘account
holder’
Location of Service
Provider
Services of operating bank
accounts, safe deposit
lockers, RTGS, NEFT, E-
payment
Online information and
database access or
retrieval services
E-Books, E-Journals /
Magazines, E-Weather
Reports
Hiring of means of
transport other than
aircraft and vessels except
yachts, upto one month
Hiring of motorcars, bus,
trucks, yachts upto one
month.
Intermediary Services Travel agent, Commission
Agent (for goods & services)

Services of Banks, Financial
Institutions, NBFC’s to Account Holders
33
Services to Place of Provision
Account Holders Location of Service Provider
Non – Account Holders Location of Service Receiver
(Rule 3 shall be applicable)
Points to Ponder
The Education Guide has clarified as follows-
Services to Account Holders - Operation of bank accounts, transfer of
money, lending, Safe Deposit Lockers, E-Payment, NEFT, RTGS
Services to Non-Account Holders - Issue of Demand Draft, Merchant
Banking Services, Portfolio Management Services, Transaction
Advisory Services

Online Information and Database Access
or Retrieval Services
34
Forbes
E-Magazine
USA
India
Ms. Alka
Pays subscription charges to
access & download magazine

Intermediary Services
35
Mr. Prathamesh
USA
India
Reliance
Industries Ltd
Provides export promotion / marketing
services & receives export commission for
getting export order
Intermediary means ‘a broker, an agent or any other person who arranges or
facilitates provision of services or supply of goods between two or more persons,
but does not include a person who provides the main service or supplies the goods
on his own account.’

Adani Ltd
(Owner of Oil
Tanker)
Dubai
India
Ibrahim Ltd
(Dubai)
Hires Oil Tanker for 22 days
Hiring of Means of Transport
36

Adani Ltd
(Owner of Oil
Tanker)
Dubai
India
Ibrahim Ltd
(Dubai)
Hires Oil Tanker for 60 days
37

Adani Ltd
(Owner of
Aircraft)
Dubai
India
Ibrahim Ltd
Hires Aircraft for 25 days
38

Adani Ltd
(Owner of
Yacht)
Dubai
India
Ibrahim Ltd
Hires Yacht for 25 days
39

Rule 10 : Goods Transportation Services
40
Service
Description
Place of Provision Illustrative list of services
Transportation of
goods by any mode
(air, rail, road, sea)
except by way of
courier or mail
Destination of Goods All types of freight
Transportation of
Goods by road by
Goods Transport
Agency
Location of person
liable to pay tax
Note: Covered in Reverse
Charge Mechanism

41
Scenarios Ocean / Air Rail / Road
Transportation of goods from
India to outside India
PoP = Outside India (not
taxable)
PoP = Outside India
(not taxable)
Transportation of goods from
outside India to India
PoP = India
(not taxable as per
negative list)
PoP = India
(taxable)
Transportation of goods within
India (From J&K to a taxable
territory)
PoP = India
(taxable)
PoP = India
(taxable)
Transportation of goods within
India (from taxable territory to
J&K)
PoP = J & K
(not taxable)
PoP = J & K
(not taxable)

Rule 11 : Passenger Transport Services
42
Passenger Transport
Services
Place where the
passenger embarks
on the conveyance
for a ‘continuous
journey’
Air Travel, Road Travel, Water
Travel, Rail Travel

43
 Journey from one place to another
 Journey with halts at various places
Delhi London
Delhi London
London New Jersey
New Jersey Delhi
Day 1
Day 5
Day 8

Rule 12 : Services Provided On Board A
Conveyance
44
Services provided on
board a conveyance
(bus, train, vessel,
aircraft) during the
course of passenger
transport operation
First scheduled
point of departure of
that conveyance
• Beauty Treatment on board
• Video Games on board
• Catering Services on board
Note: This Rule covers on board services only if provided for specific
charge i.e.; value should not be included in fare.

45
Dubai MumbaiBengaluru
Catering
Service
Dubai MumbaiBengaluru
Catering
Service

Rule 13 : Power of Central Government
to notify further Rules
46
Power of Central Government to notify
any description of service or
circumstances
Place of effective use and enjoyment
of service

Snapshots of POPOS Rules, 2012
47
General Rule
B2B Transaction
B2C Transaction
Specific Rules
• Performance Based Rule
• Property Rule
• Event Rule
• Rule for Specified
Services
• Transportation Rule for:
- Goods
- Passengers
• Rule for services
provided on board any
conveyance
Other Aspects
• Rule for services
provided at
multiple locations
• Rule for Services
provided in N.T.T.
when both S.P. and
S.R. are in T.T.
• Tie Breaker Rule

Taxability of Service Depends on -
48
Location of Service Provider
Location of Service Receiver
Place of Provision of Service
Proxy
Rule
Main
Rule

49
Presentation by : Raj Mukesh Khona
Reach me at : rajkhona1@gmail.com
Connect with me on : Linked In | Facebook | Twitter

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