IMPORT OF SERVICES IN SERVICE TAX

[Dr. Sanjiv Agarwal]

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2012 being in force, Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 shall stand rescinded.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 and 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.