Rule 4 – Place of provision of performance based services :
The place of provision of following services shall be the location where the services are actually performed, namely:-
(a) Services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service.
However, when such services are provided from a remote location by way of electronic means, the place of provision shall be the location where goods are situated at the time of provision of service.
Further, clause (a) of this rule shall not apply in the case of a service provided in respect of goods that are 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.
(b) Services provided to an individual, represented either as the recipient of service or a person acting on behalf of the recipient, which require the physical presence of the receiver or the person acting on behalf of the receiver, with the provider for th e provision of the service.
Analysis of the rule
Clause (a): The nature of services covered here are the services that are related to goods, and which require such goods to be made available to the service provider/person acting on behalf of the service provider so that the service can be rendered. It will not cover services where the supply of goods by the receiver is not material to the rendering of the service. The place of provision of such services shall be the location where the services are actually performed.
1. Only those services would be covered here, the provision of which requires the goods to temporarily come into the physical possession or control of the service provider, and without this happening, the service cannot be rendered.
2. Service involves movable objects or things that can be touched, felt or possessed.
3. Examples of such services are:-
- repair, reconditioning, or any other work on goods (not amounting to manufacture)
- storage and warehousing
- courier service
- cargo handling service (loading, unloading, packing or unpacking of cargo)
- technical testing/inspection/certification/ analysis of goods
- dry cleaning
4. Sometimes, services are provided by electronic means in relation to tangible goods located distantly from a remote location. In such a case, the actual place of performance of the service would be quite different from the actual location of the tangible goods. The place of provision here shall be the actual location of the goods and not the place of performance.
5. If the goods imported for repair are exported after repair without being put to any use other than that which is required for such repair, the said repair service would be excluded from the purview of rule 4(a).
However, such exclusion would not apply to goods that arrive in the taxable territory in the usual course of business and are subject to repair while such goods remain in the taxable territory. For instance, any repair provided in the taxable territory to containers arriving in India in the course of international trade in goods will be governed by rule 4.
Clause (b): The nature of services covered here are the services which are rendered in person and in the physical presence of the service receiver. The place of provision of such services shall be the location where the services are actually performed.
Though these are generally rendered at the service provider‟s premises, they could also be provided at the customer‟s premises, or occasionally while the receiver is on the move.
1. Examples of such services are:-
- cosmetic or plastic surgery
- personal security service
- health and fitness services
- photography service (to individuals)
- internet café service,
- classroom teaching
2. It shall also include the service actually rendered by the provider to a person other than the receiver, who is acting on behalf of the receiver, in terms of the contractual arrangement between the provider and the receiver.
| For instance, a film producer contracts with a make-up expert for make-up of the lead actors of his film. In the given case, the film producer is the receiver of the service, but the service is rendered to the actors, who are receiving the make-up service on behalf of the film producer. Hence, notwithstanding that film producer does not qualify as the individual receiver in whose presence the service is rendered, the nature of the service is such as can be rendered only to an individual, thereby qualifying to be covered under this rule. |