NEWSWEEK, OUTLOOK AND PLACE OF PROVISION OF SERVICE RULES, 2012

Finance Act, 2012 provides a negative list for  the positive journey of the Service Tax introduced eighteen years ago from 1.7.2012. It also realigned the concept of export and import of services by bringing in a comprehensive Rule, PLACE OF PROVISION OF SERVICES RULES, 2012 (For time being it is a concept). A young legal counsel of an Indian Multinational company waved his mailing address of Newsweek and asked me the consequence of this rule to the management of NEWS WEEK by OUTLOOK magazines. For better understanding of the issue that is being discussed, the relevant portion of the mailing address is copied here.

Newsweek

[BOOK POST]

IF FORWARDING ADDRESS UNKNOWN

PLEASE RETURN TO;

THE NEWSWEEK/DAILY BEAST COMPANY LLC

CIO OUTLOOK PUBLISHING (INDIA) PVT LTD

AB-10, SAFDARJUNG ENCLAVE

NEW DELH1110029

INDIA

For enquiries please:

EMAIL; [email protected]

TEL 01133505500

FAX 011-26197416

IF YOU HAVE ANY QUESTIONS ABOUT YOUR SUBSCRIPTION,

KINDLY CONTACT THE OUTLOOK GROUP AS ABOVE

From the above, it can be seen that the business related requirements are met by M/s. Outlook Publishing (India) pvt ltd on behalf of News week. As per the provisions of section 65(105) (zzb) of Finance Act, 1994, the service falls within the purview of Business Auxiliary services in as much as the services rendered by M/s. Outlook publishing (India) pvt ltd is a customer care service provided on behalf of the client i.e. M/s. Newsweek Beast Company LLC. The same qualify as an export of services if the payment is received in convertible foreign exchange, a fact to be verified.

Once the PLACE OF PROVISION OF SERVICES RULES, 2012 is notified, whether the service becomes taxable and liable for payment of tax. It appears NO. The Rule specify place of provision, generally as the location of the service provider. Further the performance based services, as per Rule 4, does not include the above nature of services, even though a doubt may arise whether it will be within the ambit of sub-rule (b) of rule 4 which reads as “services provided in conjunction with the supply of goods under another contract” – the place of provision of service shall be the location where the services are actually performed.

The above activity of M/s. Outlook will not attract service tax even after introduction of place of provision of services rules, 2012, in as much as the contract for supply of Newsweek is between the …Beast Company and the subscriber and the service contract between …Beast Company and Outlook. This cannot be read in conjunction with supply of goods and hence outside the purview of Rule 4(b) of place of provision of services rules, 2012.