FAQs – Place of Provision of Service under Service Tax

Place of Provision of Service Rules have been notified w.e.f. 1-7-2012. The following FAQs are based on various queries received on the Taxmann’s Query Board.

1. Relevance of the Place of Provision of Service Rules
What the purpose of Place of Provision of Service (POPS) rules?
As per section 66B of Finance Act, 1994, service tax is payable if service is provided in a taxable territory. ‘Taxable territory’ broadly means all States and Union territories of India (excluding J&K) plus 200 nautical miles inside the sea from baseline.
Section 66C of Finance Act, 1994 empowers Central Government to make rules to determine place where
service has been provided or agreed to be provided.
The Place of Provision of Service Rules POPS) are primarily to determine whether or not service is provided in ‘taxable territory’
What is relevance of Place of Provision of Service Rules in respect of export of service?
The rules are relevant for export of service but these rules themselves to not determine whether service is ‘export’. For example, if place of provision of service is taxable territory, service tax will be payable even if payment is received in foreign exchange and service receiver is located outside taxable territory.
On the other hand, if place of provision of service is outside taxable territory (say in Nepal, Bangladesh or Dubai), service tax will not be payable even if payment is not received in foreign exchange (or even payment is not received at all) or service receiver is located in India.
What is relevance of Place of Provision of Service Rules in respect of import of service?
If place of provision of service is outside India, it will not be ‘import of service’ under any circumstances. A service will be ‘import of service’, if (a) Place of provision of service is ‘taxable territory’ (b) Services is received from non-taxable territory (c) Service is provided by a person located in Located in non-taxable territory and (d) Service is received by a person located in taxable territory. In such case, it will be import of service even if payment is made in Indian rupees. The person receiving the service in taxable territory will be liable to pay service tax under reverse charge mechanism.
We are having office outside India. We are maintaining the office for which amounts are remitted from India. Explanation 4 to section 65B(44) of Finance Act, 1994 (which defines service’ states as follows – ‘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’. In view of the aforesaid explanation, department is of the view that we are importing service from our foreign branch and hence we are liable to pay service tax under reverse charge mechanism. Please advise.
Firstly, you are not receiving any service from your branch. Secondly, the explanation states that these will be treated as ‘different establishments’ and not ‘different persons’. It is well settled that service provider and service receiver should be different ‘persons’. You cannot provide service to yourself [Really, this explanation is at wrong place. The explanation is relevant for determining ‘place of provision’ on basis whether a service is provided by establishment in India or outside India]

What is export of service?
As per Rule 6A of Service Tax Rules, as inserted w.e.f. 1-7-2012, a service shall be treated as export of service when all following conditions are satisfied – (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 in negative list of services (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) Service provider and receiver are not merely branches of same person.
What is difference between export of service and POPS Rules?
If place of service is outside taxable territory but all requirements of ‘export of service’ under rule 6A are not satisfied, following are implications – (a) Export rebate is not available (b) The service will be treated as ‘exempted service’ and Rule 6 of Cenvat Credit Rules relating to proportionate reversal or payment of 6% ‘amount’ will apply (c) However, service tax will not be payable.
On the other hand, if place of provision of service is ‘taxable territory’, service tax will become payable even if all other conditions of rule 6A are fulfilled.
What is relevance of Place of Provision of Service Rules in respect of services provided to and by unit or developer in Special Economic Zone (SEZ)?
It may be noted that SEZ is treated as ‘in taxable territory’ for purpose of service tax, though for purpose of export and import of goods, it is treated practically as out of India.
Provisions of exemption in relation to services provided to SEZ have been made in Notification No. 40/2012-dated 20-6-2012. As per these rules, services provided to SEZ unit or developer are exempt if service is ‘wholly consumed within SEZ’. The place of provision of service rules are relevant to determine whether the service is ‘wholly consumed within SEZ’.
There is no exemption if unit in SEZ provides service to person outside SEZ. Service tax will be payable by SEZ unit itself and reverse charge will not apply.
What is relevance of Place of Provision of Service Rules in respect of services provided to and by person in Jammu and Kashmir?
Since Jammu and Kashmir is outside taxable territory, service tax will not be payable if place of provision of service is J&K. However, it will not be ‘export of service’ since payment will be received in Indian Rupees. Hence, any export rebate will not be available.
On the other hand, if place of provision of service is ‘taxable territory’ and service provider is from J&K, service tax will be payable by person receiving the service in ‘taxable territory’ under reverse charge mechanism.
2. Overview of Place of Provision of Service Rules
What is the basic scheme to determine Place of Provision of Service?
Rule 14 of Place of Provision of Service Rules states that later rule prevails over earlier rules. Thus, rules apply in reverse order.
Place of Provision of Service Rules make specific provisions in respect of certain specified services – (a) banking company, FI to account holders, online information and database access or retrieval services, intermediary of services, hiring of means of transport upto one month (rule 9) (b) goods transport services (rule 10) (c) passenger transportation (rule 11) and (d) Services provided on board a conveyance (rule 12)
These rules in respect of these specific services prevail over other rules. In case of all other services, the rules will apply in following sequence -

• · Place of Provision of Service is taxable territory where both service provider and service receiver are in taxable territory, except the specified services covered under rule 9 to 12 above [Rule 8]
• · Place of Provision of Service is taxable territory if services covered under rule 4, 5 or 6 are provided even partly in taxable territory [Rule 7]
• · In case of services relating to event, Place of Provision of Service is where the event is actually held [Rule 6]
• · In case of services directly in relating to immovable property, Place of Provision of Service is where the immovable property is located or intended to be located [Rule 5]
• · In case of performance based services (relating to goods), Place of Provision of Service is where service is actually performed (except where goods are temporarily imported in India for repairs, reconditioning or re-engineering for re-export) [Rule 4(a)]
• · In case of performance based services (where physical presence of service receiver or person acting on behalf of recipient of service is required), Place of Provision of Service is where service is actually performed [Rule 4(b)]
• · In all other cases, Place of Provision of Service is the location of service receiver [Rule 3]
• · If service does not fall under any of rules 4 to 12 and location of service receiver is not available, location of provider of service is the place of provision of Service [Proviso to rule 3]

How to determine location of service provider and service receiver?
Basically, location of service receiver or service provider is the place where he has obtained single registration or a centralised registration under service tax.
If the service provider is not registered under service tax (or has obtained multiple registrations at different places), then location of his business establishment will be his ‘location’. However, if the service is obtained or provided at some other place (which is a fixed establishment), that place will be treated as his location.
What is significance of ‘location of service provider’ and ‘location of service receiver’?
These terms are used I Place of Provision of Service Rules at various places to determine Place of Provision of Service e.g. rule 3 (which is residuary rule), states that location of service receiver is place of provision of service (if no other rule is applicable).
3. Provisions relating to transportation of goods and passengers
What is place of provision of service in case of passenger transportation?
In case of passenger transportation, the place of provision is the place where passenger embarks on the conveyance (even if there are breaks in between, if it is a continuous journey) [rule 11].
This rule also applies in respect of services provided on board a conveyance [rule 12].
What is place of provision of service in case of transportation of goods?
Interestingly, in case of goods transport, the provisions are reverse to passenger transportation. Here, destination of goods shall be place of provision of service, except in case of mail or courier and services of Goods Transportation Agency (GTA) [rule 10].
In case of mail or courier, location will be determined as per rule 3 i.e. on basis of location of service receiver. Thus, if the person who is booking mail or courier is in taxable territory, that will be place of provision of service. In simple words, service tax will be payable in such cases even if the destination of mail or courier is outside taxable territory (i.e. outside India)
What is place of provision of service in case of services of Goods Transportation Agency?
In case of service of Good Transportation Agency (GTA), location of person liable to pay service tax will be Place of Provision of service. Thus, if goods are booked from India to Nepal, Bangladesh or Pakistan and if freight is paid by Indian party, India will be place of provision of service.
If freight is payable by person in Nepal, Bangladesh or Pakistan, the Goods Transportation Agency (GTA) itself will be liable to pay service tax.
What is the service provided by freight forwarder?
A freight forwarder arranges for export and import shipments. Usually he provides ‘point to point’ composite service including loading/unloading, transportation within exporting as well as importing country, clearance from customs both in originating country and destination country. In such cases, he acts on his own account.
Sometimes, he acts as an intermediary (i.e. agent). If he is acting only as intermediary of service, rule 9(c) applies and location of service provider will be the place of provision of service.
What will be the position if freight forwarder acts on his account and provided a composite (bundled) service?
In such case, if destination of goods is outside India, place of provision of service is outside taxable territory as per rule 10 and hence service tax will not be payable. On the other hand, if destination of goods is India (i.e. import of goods), India will be place of provision of service and service tax will be payable on the entire bill amount of freight forwarder.
We are freight forwarder located in India, providing service of import of goods to Indian customers. What would be the service tax liability?
In case of services of import of goods provided by freight forwarder, service tax is payable on entire charges, as place of provision of service is ‘taxable territory’ (India). The charges include ocean freight also.
Ocean freight from outside India upto the customs station of clearance in India is not subject to service tax as it is in negative list of services as per section 66D(p) of Finance Act, 1994.
Hence, it may be advisable to split the contract into three – one outside India (as intermediary), second ocean freight (actual basis) and third services within India.
In the contract is split, service tax will be payable on (a) Commission received from foreign freight forwarder ad (b) Services provided in India. If ocean freight is collected on reimbursement basis, it will be collection as ‘pure agent’ of the customer and hence service tax will not apply.
4. Services of Bank, FI and NBFC
What is place of provision of service in case of services by Bank, Financial Institution or NBFC?
If the Bank, FI or NBFC is providing service to their ‘account holders’, the place of provision is where the Bank, FI or NBFC is located [rule 9(a)] , “Account” means an account bearing an interest to the depositor, and includes a non-resident external account and a non-resident ordinary account; [NRE and NRO accounts] [rule 2(b) of Place of Provision of Service Rules].
For example, if Bank in India is providing service to NRI having interest bearing account with the Bank, the place of provision of service will be ‘taxable territory’ and service tax will be payable. On the other hand, if Bank outside India provides some service to person in India who is holding interest bearing account with that Bank, place of provision of service will be outside India and no service tax is payable. Hence, reverse charge also will not apply.
This will cover services like issuing of cheques, money transfer, safe deposit lockers, account opening charges etc.
What about services provided by the Bank/FI/NBFC to other than account holders?
In case of other services, rule 3 applies and location of service receiver will be the place of provision of service.
Services not normally provided to account holder like financial leasing, merchant banking, sale or purchase of foreign exchange, asset management, advisory services will be covered under rule 3 (i.e. location of service receiver) and not under rule 9(a).
We are exporters and are submitting documents through an Indian bank. The Bank in India sends the documents to foreign Bank. The foreign Bank collects the amount, deducts their charges and remits the balance amount to our Indian Bank. What is the place of provision of service?
In such case, rule 3 (residuary rule) applies and place of provision of service is ‘taxable territory’ (India). Service tax will be payable. However, really the recipient of service of the foreign Bank is Bank in India and that Bank will be liable to pay service tax under reverse charge.
It is true that in many cases, department insists that reverse charge is payable by the Indian exporter. However, in my view, the Indian exporter will be liable to pay service tax under reverse charge only if the exporter sends the documents directly to foreign bank for collection.
What you say here seems to be contrary to CBE&C circular dated 10-7-2012. This circular clearly states that there is no service tax on remittances from outside India.
CBE&C circular No. 163/14/2012-ST dated 10-7-2012 has clarified as follows – There is no service tax per se on amount of foreign currency remitted to India from overseas, as it is mere transaction in money. Further, there is no service tax on remittance charges levied for sending the money to India, as it is service provided outside India and hence not taxable. Even Indian counterpart Bank or Financial Institution who is charging the foreign Bank or foreign party for services provided in India is not liable to pay service tax as the service recipient (foreign Bank or entity) is outside India and hence location of service recipient is outside India.
Really, this circular applies only where the remittance charges are paid by remitter who is outside India. Here both service provider and service receiver are outside India. The circular does not apply when service receiver is in India.
5. Online information and database access or retrieval services
What is meaning of ‘online information and database access or retrieval services’?
“Online information and database access or retrieval services” means providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network [Rule 2(l) of Place of Provision of Service Rules].
What would get covered under this head?
This head will cover web-based services providing trade statistics, legal and financial data, matrimonial services, immovable property related services, online reports, etc.
In case of Cloud computing, place of provision of service would depend on nature of service provided.
Electronic trading, telecommunication services, internet services will not get covered under this head.
We are Indian based company providing “Online information and database access or retrieval services” to foreign customers and get payment in foreign exchange. What would be taxability?
In case of online information and database access or retrieval services, the place of provision is the location of service provider. Hence, this will be a taxable service and location of service provider is ‘taxable territory’ (India). This will not be export of service.
We are accessing and downloading information from foreign website and making payment in foreign exchange. Are we liable to pay service tax?
The place of provision is outside India and hence there is no service tax liability. Since there is no service tax liability, question of payment under reverse charge mechanism does not apply. Note that reverse charge mechanism is only to decide person liable to pay service tax. That provision does not determine service tax liability.
6. Intermediary Services
Who is intermediary?
“Intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of service (herein after called the ‘main’ service) between two or more persons, but does not include a person who provides the main service on his account [Rule 2(f) of Place of Provision of Service Rules]
Note that the definition covers only broker and agents of services – and not of goods.
What is place of provision of service in case of intermediary?
In case of intermediary of services, place of provision of service is the location of service provider [rule 9(c) of POPS Rules]
In case of intermediary of goods (like commission agent of goods), rule 3 will apply i.e. location of service receiver will be the place of provision of service.
We are stock brokers from some NRI and FII customers. We get payment in foreign exchange for our services. Are we liable to pay service tax?
“Goods” means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale – section 65B(25) of Finance Act, 1994 introduced w.e.f. 1-7-2012.
Securities are ‘goods’. Thus, intermediary of securities is intermediary of goods. Hence, rule 3 will apply i.e. location of service receiver will be place of provision of service. If such person is outside taxable territory, service tax will not be payable.
My client is engaged in recruiting students for foreign university. My client gets commission from foreign university in foreign exchange on the basis of number of students joining the University through my client. Is my client liable to pay service tax?
Your client is intermediary in service and should be liable to pay service tax as per rule 9(b) of POPS Rules.

We are engaged in medical tourism. We help foreign patients for getting medical facilities in India. We plan their travel, stay in India, medical treatment and return journey. We charge Lumpsum amount to foreign patient. Are we liable to pay service tax?
You are not intermediary since ‘intermediary’ does not include a person who provides the main service on his account. Here, you are providing a ‘bundled service’ and predominant nature of the service is medical service.
In such case, rule 4(b) of POPS Rules will apply and place of provision of service will be India. However, since medical services are not taxable, there will be no liability of service tax.
If you are getting only your service charges and rest of the expenses are recovered on actual basis, you will be intermediary in services. As per rule 9(c) of POPS Rules, place of provision will be taxable territory (India) and service tax will be payable on your commission.
7. Service provider and service receiver both in taxable territory
Explain provisions relating to place of provision of service if both service provider and receiver are located in taxable territory?
In such cases, place of provision of service is ‘taxable territory’ (i.e. India) [rule 8 of POPS Rules]. This will be so even if entire service is provided outside India.
We are providing the service to a government client having its registered office in Haryana. As the project site is located in J&K we are till now exempted from paying service tax. We have the place of business in New Delhi. Now with coming to the picture of place of provision of the service do we have to pay the service tax as government client is a registered company and registered office is situated at Haryana?
Is that Government company registered under service tax? Do they have any business establishment in J&K? If that Government company is registered under service tax in Haryana, then you will be liable to pay service tax as per rule 8 of Place of Provision of Service Rules. If they are not registered under service tax and if they have business establishment in J&K, then service tax will not apply
A, Indian tour operator is providing package tour to Singapore and Hong Kong to Indian tourists. Is the service taxable?
The service will be taxable as both service provider and service receiver are in taxable territory.
An Indian contractor has obtained construction contract in Dubai. He has given major part of the construction work in Dubai to a sub-contractor in India. Would the sub-contractor liable to pay service tax?
In view of rule 8 of POPS Rules, the service of sub-contractor will be taxable as both service provider

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and service receiver are in taxable territory. Note that as per rule 5 of POPS Rules, the place of provision of service should be outside taxable territory as the service related to immovable property. However, as per rule 14 of POPS Rules, later rule prevails over earlier rule. Hence, rule 8 will prevail over rule 5.
An Indian film actress goes on foreign tour with her beautician, who provides her beauty treatment outside India. Would the servicer of the beautician provided outside India will be subject to service tax?
In view of rule 8 of POPS Rules, the service of the beautician will be taxable as both service provider and service receiver are in taxable territory, even though as per rule 4(b) of POPS Rules, the place of provision of service should be outside taxable territory as performance of service is outside the taxable territory.
I am providing service to my Indian customers of booking of hotels located in UK. I get commission from the Hotels in UK in foreign exchange. Is service tax payable? What is place of provision of service?
Though the immovable property is situated outside India, since both service provider and service receiver are located in taxable territory (India), India will be treated as place of provision of service, as per rule 8 of POP Rules. Hence, service tax will become payable even if the payment is received in foreign exchange.
Is the rule 8 valid?
This provision (rule 8) appears to be against section 66B of Finance Act, 1994, which provides for levy of service tax only when the service is provided or agreed to be provided in taxable territory.
8. Services partly performed in India
What would be the taxability if a service is provided partly in India and partly outside India?
Where any service referred to in rule 4, 5, or 6 is provided at more than one location, including a location in the taxable territory, its place of provision shall be the location in the taxable territory where the greatest proportion of the service is provided [Rule 7 of Place of Provision of Service Rules].
This Rule covers situations where the actual performance of a service is at more than one location, and one or more of such locations may be outside the taxable territory.
What is relevant is ‘greatest proportion’ in taxable territory. Thus, part of service done in non-taxable territory is not relevant. Even if minor part is done in India, entire service will be taxable.
The rule overrides provisions of rule 4 (performance or goods related services), rule 5 (immovable property related services) and rule 6 (event based services).
However, separate invoices for services provided from different territories is permissible.- Para 5.7.1 of CBE&C’s ‘Taxation of Services : An Education Guide’ published on 20-6-2012.
9. Event based services
What is Place of provision of services relating to events?
The place of provision of services provided by way of admission to, or organization of, a cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission, shall be the place where the event is actually held [Rule 6 of Place of Provision of Service Rules]
Cultural, sporting, educational, entertainment, exhibition, conference will get covered under this rule. Only admission or organisation related services are covered under this rule.
Thus, if IPL is held in South Africa, service tax will not apply even if all players from India go and play there.
10. Immovable Property related services
Explain provision relating to lace of provision of services relating to immovable property
The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or coordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located [Rule 5 of Place of Provision of Service Rules]
Maintenance of immovable property, security, architectural services, legal services in respect of transfer, renting, survey, hotel accommodation etc. will get covered under this rule.
An NRI buys a flat in Ahmedabad from builder and makes entire payment in foreign exchange. Is the builder required to pay service tax?
The builder is liable as immovable property is situated in India.
A foreign guest stays in Taj Hotel in India and pays in foreign exchange. Is service tax payable?
The service tax is payable as the immovable property is located in taxable territory.
An advocate in India provides services relating to immovable property in India to a NRI. What is the place of provision of service?
The place of provision of service is India. Strictly legally, the Advocate will be liable to pay service tax as the service receiver is located outside India.
11. Performance on goods related services
What are provisions related to performance on goods related services?
In case of performance based services relating to goods, place of provision of service is where service is actually performed [rule 4(a)]
In case of service provided from remote location, where goods are situated is place of provision of service [These would cover computer based services].
The services covered in rule 4(a) relate to goods and would cover services like repairs, reconditioning, storage, warehousing, courier, cargo handling, technical testing, dry cleaning, erection commissioning, annual maintenance contract [In case of repairs and reconditioning, there is exemption if imported goods are repaired or reconditioned and re-exported).
It cannot cover consultancy or market research service as any performance on goods is not required.
We are getting some machines repaired under work contract from outside India is there any service tax liability involved in this?
The place of provision of service is outside India as per rule 4 and hence there is no service tax liability.
What would be place of provision of service where physical presence of service receiver required?
Where physical presence of service receiver (who is individual) is required, place where service is performed will be place of provision of service [Rule 4(b)]
This would cover Cosmetic surgery, beauty treatment etc. Even training should get covered in this head.
An Indian company deputes it engineer for training in Germany. After training, the engineer comes back to India. Whether the service is taxable under reverse charge?
Training of a person is performance based as physical presence of trainee is required. Hence location of training is place of provision as per rule 4(b)
Thus, if training is conducted outside India, then Place of Provision of Service is outside India and then not subject to service tax.. Obviously, there is no question of reverse charge.
We are providing coaching through video conference to persons outside India. Payment is received in foreign exchange. Is service tax payable?
Here, physical presence of student is not required in India – hence rule 4(b) cannot apply. This is not online information and database access or retrieval services – since in that case what is envisaged is information available on web Hence rule 3 should apply. Since the service receiver is outside India, place of provision of service would be outside India and not taxable. It should also qualify as export of service.
Explain provision of services in relation to import of goods for repairs, reconditioning or re-engineering and re-export.
Second proviso to Rule 4(a) states that rule 4(a) of Place of Provision of Service Rules shall not apply if goods are temporarily imported in India for repairs, reconditioning or re-engineering for re-export, subject to conditions as may be specified in this regard.
So far, no conditions have been specified. Thus, at present, the provision is unconditional, since the word used is ‘may’.
Thus, if goods are temporarily imported in India for repairs, reconditioning or re-engineering for re-export, rule 4(a) will not apply. Hence, rule 3 will apply and if service receiver is out of ‘taxable territory’ the place of provision of service will be outside taxable territory and service tax will not be payable.
‘X’ in non-taxable territory (Abroad) received order for installation & commissioning from ‘Y’ who is in taxable territory (India). ‘X’ sub-contracted the same to ‘Z’ who is in taxable territory (India). Is ‘Z’ required to pay service tax?
Z is surely liable to pay service tax as place of provision of service is India (taxable territory).
12. Residuary Rule
Which rule applies if no other rule applies?
If no other rule of POPS Rules applies, Location of service receiver is place of provision of service [Rule 3]. This is residual rule.
This rule will cover services of Commission Agents of goods, stock brokers, management and technical consultancy services, Banking services (other than those to account holders), market research etc.
A foreign company issues Advertisement on TV/Radio published in Indian TV and makes payment in foreign exchange. Is the service taxable?
This service should come under rule 3 and not taxable if service receiver is outside India.
We are Commission Agent for Principals who are manufacturer of machinery in Germany. We procure orders from Indian customers and forward them to our foreign Principals. The machinery is exported directly by them to Indian parties and we get commission. Further, in some cases, where repairs to the machinery supplied by them is required during warranty period, we undertake the repairs and raise Bill on the foreign Principals. They make payment to s in foreign exchange. Please clarify taxability of the transaction.
The first transaction is covered under rule 3 of Place of Provision of Service. The Place of Provision is Germany and hence transaction is not subject to service tax. You can claim rebate of input services used for export of these services, under Notification No. 39/2012-ST dated 20-6-2012.
The second transaction relates to performance on goods. Since the goods are located in India, the Place of Provision of Service is India. Hence, service tax will become payable. This cannot qualify as Export of Service and hence no rebate is available.
One of my client has procured an order from Party No.1 of a specific software development from outside India. The client has out-sourced the said order to Party No. 2 outside India. Now the Party No. 2 will develop the specified software and bill it to the client. Then the client will supply the said software and bill it to Party No.1. In this event, kindly clarify the treatment of service tax.
If party 2 is supplying software within India and billing in India, then service tax should apply However, if software is sold outright outside without bringing it in India (either physically or electronically), it should be simple trading in goods and then service tax will not apply.
If your client is supplying software to party No. 1, it should be export of service and service tax should not apply as it would get covered under rule 3 of POPS Rules.
Our buying agent charge commission on the FOB Value for the services rendered. They are located outside India and they are engaged for helping us in procuring the material etc. they charged some % commission on the imported value. Whether those will be covered under reverse charge?
The service is surely taxable and you will be liable under reverse charge mechanism to pay service tax.
13. Services to and by SEZ
Is provision of service to SEZ unit or developer an ‘export of service’?
This is not ‘export of service’. Place of Provision is ‘taxable territory’. However, exemption is available if conditions of Notification No. 40/2012-dated 20-6-2012. As per the provisions, if the services provided are wholly consumed for authorised operations within SEZ, the provider of service is not required to pay service tax. This is optional and he can pay service tax if he desires, and then SEZ unit or SEZ Developer (Service receiver) can claim refund.
If the services are not wholly consumed within SEZ, the SEZ unit or Developer will be eligible to obtain refund only on proportionate basis.
Would reversal of Cenvat or payment of 6% ‘amount’ be required if service provided to SEZ unit or developer is exempted from service tax?
Rule 6(6A) as amended w.e.f. 1-7-2012 specifically provides that provisions of rules 6(1) to rule 6(4) shall not apply to (a) services provided to SEZ unit or developer for their authorised operations, without payment of service tax or (b) export of service.
Thus, Service provided to unit or Developer in SEZ or for export is not ‘exempt service’ for purpose of rule 6 and reversal of Cenvat credit or payment of 6% ‘amount’ is not required.
In Sobha Developers v. CCE (2011) 33 STT 13 (Mag) = 13 taxmann.com 84 = 276 ELT 214 (CESTAT), it was held that service provided to SEZ Developer is not export (However, on other ground, it was held that reversal of Cenvat credit is not required).
Is SEZ liable to pay service tax on import of service?
Though there is no specific exemption to SEZ in respect of import of services, services wholly consumed within SEZ are exempt. Hence, SEZ should not be liable to pay service tax on services imported and consumed within SEZ since really, reverse charge is only mechanism to collect service tax. Reverse charge cannot impose a tax liability which is otherwise not there.
Would services provided in SEZ by sub-contractor to main contractor taxable?
As per the notification, the service is exempt only if it is received by SEZ developer/SEZ unit. Thus, exemption does not apply to services provided to intermediary (e.g. sub-contractor providing services to main contractor) who, in turn, provides service to SEZ developer/co-developer or SEZ unit.

If the sub-contractor and main contractor are covered under works contract, the sub-contractor can claim exemption from service tax if main contractor is exempt from service tax.