Notification No. 30/12- Service Tax
The Central Government hereby notifies the following taxable services and the extent of service tax payable thereon by the person liable to pay service tax for the purposes of the said sub-section, namely:-
(I). The taxable services,—
(B) Provided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory;
(II) The extent of service tax payable thereon by the person who provides the service and the person who receives the service for the taxable services specified in (I) shall be as specified in the following Table, namely:-
- in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory
Percentage of Service tax payable by the person providing service – Nil
Percentage of service tax payable by the person receiving the Service -100%
Payment of service tax on reverse charge basis on services provided outside the taxable territory under the new regime:
With effect from 01.07.2012, Section 66A is gone. Section 68(2), as amended with effect from 01.07.2012, reads as under:
68(2) Notwithstanding anything contained in sub-section (1), in respect of such taxable services as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
It is clear that, as per Section 68(2), the powers of the Central Government to notify services can be exercised only in respect of ‘taxable services’.
Taxable service has been defined, under Section 66B,(51) to mean “ any service on which service tax is leviable under Section 66B.”
Section 66B is the all-important chargeable section, which reads as under: 66B.
There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve percent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed
While Section 66B is the chargeable section, Section 68 is only a machinery provision. In other words, an ‘activity’ as understood under the new service tax law, will have to get covered under Section 66B, before Section 68(2) can get invoked.
Consequently, once section 68(2) would fall vis-à-vis Section 66B, the legality of the Notifications issued under Section 68(2) would also fail, including the Notification No. 30/2012-ST dated June 20, 2012.
In terms of this Notification (item No.10), the Reverse Charge Mechanism requiring the importer of services to pay service tax is attracted only in “in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory”.
When the charging section 66B becomes inoperative in respect of services rendered (by the non-resident service provider) and received (by the person located in India), no Rule or Notification can fasten a service tax liability.
The provisions of section 66A have been omitted by the Finance Act, 2012
and shall cease to operate from 1-7-2012 when the negative list approach, as introduced by the Finance Act, 2012 comes into operation.
Similarly, with the Place of Provision of Services Rules, 2012 being in force, Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 shall stand rescinded.
Payment of Tax under Reverse Charge (w.e.f. 1-7-2012) Vide Notification No. 30/2012-ST dated 20.06.2012, in suppression of Notification No. 36/2004-ST dated 31.12.2004.
Notification No. 15/2012-ST dated 17-3-2012, it has been notified that service tax in relation to any taxable service provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in a taxable territory shall be payable under reverse charge method to the extent of 100 percent by the person receiving the said service.
Vide Notification No. 25/2012-ST dated 20-6-2012,
services received from a provider to service located in a non-taxable category by —
(a) Government, local authority, government authority or individual in relation to any purpose other than commerce, industry, business or commerce;
(b) Entity registered under section 12AA of Income-tax Act, 1961 for charitable activities;
(c) Person located in non-taxable territory; are exempt from levy of service tax. Point of Taxation in Import of Services.
Point of Taxation Rules, 2011 provide for determination of point of taxation in different situations.
According to Rule 7, where the obligation to pay service tax on reverse charge basis is as the service recipient in terms of rule 2(1)(d) of the Service Tax Rules, 1994 is respect of services notified under section 68(2) of the Finance Act, 1994 (includes import of services), the point of taxation shall be the date of making the payment.
However, if the payment is not made with six month of the date of invoice, the point of taxation shall be determined as if this rule does not exist.
In case of associated enterprise, when the service provider is outside India, the point of taxation shall be the earlier of the date of credit in the books of account of the service receiver or the date of making the payment.
In the case of services where the recipient is obligated to pay service tax under rule 2(1)(d) of Service Tax Rules i.e. on reverse charge basis, the point of taxation shall be the date of making the payment.
However, if the payment is not made within six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist.
Moreover, in the case of associated enterprises, when the service provider is outside India, the point of taxation will be the earlier of the date of credit in the books of account of the service receiver or the date of making the payment.
Import of Service
Actually this term has not been used in law but used frequently in discussions. The service is ‘import’ if following are satisfied.
If place of provision of service is taxable territory [If place of provision of service is outside India, then there is no service tax liability. Hence, no question of service tax].
If service provider located outside taxable territory and service receiver located in taxable territory [If both are in taxable territory, the service provider liable. If both are outside taxable territory, no question of service tax at all].
Service receiver liable to pay service tax under reverse charge if aforesaid conditions are satisfied.
Cenvat credit can be taken after payment of service tax by GAR-7 challan, if the service is eligible as Input Service under Cenvat Credit Rules.
Some important services under Import of Service
Foreign Commission Agent.
Banking and Financial Services (e.g. for ECB, Issue of GDR or ADR)
Management and technical consultancy.
Advertisements issued by Indian Business Entity and published outside India on TV or radio (If it is in print media, no service tax as it is in negative list).
Exemptions from service tax on Import of Service
Import of service by Government, local authority or Governmental authority for non-commercial purposes
Import of service by individual for purpose other than commerce, industry, business or profession
Imports for charitable purposes by Charitable Organisations registered under section 12AA of Income Tax Act.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.