Pradeep Jain - Chartered Accountant

Query

(Pavan Khabiya) Posted On: 18 Feb, 2014

1.1. One of our clients is engaged in Overseas Education Consultancy ( named as ABC Consultants). On behalf of foreign universities, ABC Consultants offer admission services to students in India who intend to pursue higher studies at such overseas universities. 1.2. An agreement is executed between ABC Consultants and Foreign University, whereby, ABC Consultants agree to act as an agent of such University, for placement of prospective students. In terms of the said agreement, the services to be offered by ABC Consultants includes:  Advise on course and application formalities of the university;  Checking competency of the prospective student;  Ensuring authenticity of the documentation;  Promotion of activities of the university;  Supporting students in their visa applications;  Making students aware of the policies of the university 1.3. For the aforesaid services, Foreign University pays commission [as per the agreed terms] to ABC Consultants. Further, for the aforesaid assistance provided to students, ABC Consultants does not charge any fees to the students. 2. QUERY: 2.1. In light of the facts set out in the background above, ABC Consultants wishes to understand the Service tax implications on commission received from foreign universities, under the new regime for taxation of services introduced by Union Budget 2012-2013 (effective 1-7-2012). 2.2. Whether the said services will be covered under the definition of “Intermediary Services” as per Rule 9 of Place of Provision of Services Rules.

The definition of intermediary services is given in Rule 2 (f) of the Place of Provision of Service Rules, as follows:- “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main’ service) between two or more persons, but does not include a person who provides the main service on his account. On analysing the above definition, the services provided by ABC Consultants get covered under intermediary services. As such, the provision of Rule 9 of the POPS Rules would apply. In case of specified services covered under Rule 9, the place of provision of service shall be the location of the service provider. Since ABC Consultants fall under intermediary service hence they are covered under Rule 9 and thus place of provision shall be location of service provider, i. e., place where ABC Consultant is situated. Since the query does not specify the location of ABC Consultant therefore levy of service tax is dependent on the location of ABC Consultant. If ABC Consultant is situated in India, i.e., taxable territory, the place of provision of service would be in taxable territory and so service tax would be payable by ABC consultants. However, if ABC Consultants is located outside India, then no tax would be payable as the place of provision of service would be in non-taxable territory

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