Chapter 34

Services provided by person located in a non- taxable territory

Effective date:

(1st July, 2012)

Scope of Exempt Service –

Services received from a provider of service located in a non- taxable territory by-

(a)  Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;

(b)  an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or

(c)  a person located in a non-taxable territory;

 

Meaning & definitions:

charitable activities” means activities relating to –

(i)  public health by way of –

(a)  care or counseling of

(i) terminally ill persons or persons with severe physical or mental disability,

(ii) persons afflicted with HIV or AIDS, or

(iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

(b)  public awareness of preventive health, family planning or prevention of HIV infection;

(ii)  advancement of religion or spirituality;

(iii)  advancement of educational programmes or skill development relating to,-

(a)  abandoned, orphaned or homeless children;

(b)  physically or mentally abused and traumatized persons;

(c)  prisoners; or

(d)  persons over the age of 65 years residing in a rural area;

(iv)  preservation of environment including watershed, forests and wildlife; or

(v)  advancement of any other object of general public utility up to a value of,-

(a)  eighteen lakh and seventy five thousand rupees for the year 2012-13 subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during 2011-12;

(b)  twenty five lakh rupees in any other financial year subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during the preceding financial year;

governmental authority” means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution;

local authority” means-

(a)       a Panchayat as referred to in clause (d) of article 243 of the Constitution;

(b)       a Municipality as referred to in clause (e) of article 243P of the Constitution;

(c)       a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund;

(d)       a Cantonment Board as defined in section 3 of the Cantonments Act, 2006; (41 of 2006.)

(e)       a regional council or a district council constituted under the Sixth Schedule to the Constitution;

(f)        a development board constituted under article 371 of the Constitution; or

(g)       a regional council constituted under article 371A of the Constitution;

non-taxable territory” means the territory which is outside the taxable territory;

 

(See Notification no. 25/2012 dated 20.06.2012, effective from 01.07.2012)

 

Clarification by the Board

(Taxation Guide – Guidance Note – 7 – Exemptions dated 20.06.2012)

7.11.17 I am resident in Jammu and Kashmir and planning to construct a property in Delhi. I have got the architectural drawings made from an architect who is also resident in Jammu and Kashmir. Am I liable to pay service tax on architect services?

No. Even though the property is located in Delhi- in a taxable territory- your architect is exempt from service tax as both the service provider and the service receiver is in a non-taxable territory.

7.11.18 I am an individual receiving services from a service provider located in non- taxable territory, am I required to pay service tax?

If you are using these services for industry, business or commercial purposes, you are required to pay tax under reverse charge, unless otherwise exempt or in negative list. If use is for other purposes, you are exempt from service tax.”