2021 (7) TMI 534 - AAR - GST

Classification of services - resort providing various other services - providing house boat for cruises - meals were provided as part of package - Alcohol provided if any is to be billed separately - classified under the Chapter 99 Heading 9964 and Service Code 996415? - N/N. 11/2017-Central Tax (Rate) dated 28-06-2017 and N/N. 8/2017-Integrated Tax (Rate) dated 28-06-2017 - Input Tax Credit. HELD THAT - The Scheme of Classification of Services is notified as Annexure to Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. Chapter 99 - Heading - 9964 pertains to passenger transport services and 996415 pertains to local water transport services of passengers by ferries cruises and the like. The Explanatory Notes to the Heading 996415 states that the service code includes inland water cruises that include transportation accommodation food and other incidental services in an all-inclusive fare. The services rendered by the applicant as detailed above squarely falls under the Heading 996415 in view of the explanatory note and hence the services are appropriately classifiable under SAC 996415. Applicable rate of GST - HELD THAT - The entry at SI No. 8 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 pertains to the rate of tax applicable for services falling under Heading -9964 - Passenger transport services - services rendered by the applicant that are classifiable under Heading 996415 is covered by the above entry in Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and is accordingly liable to GST at the rate of 18%. Eligibility for ITC - HELD THAT - Section 17 of CGST Act pertains to apportionment of credit and blocked credits. Sub-section (5) of Section 17 specifies the list of goods and services in respect of which input tax credit is not available except under the situations specified therein. Vessels food and beverages are included in the list specified in Section 17 (5) and hence input tax credit of tax paid on vessels and in the repair and maintenance of vessels and in respect of food and beverages are not available except when they are used for the purposes specified therein. The applicant is eligible for the input tax credit in respect of the expenses incurred by them on refurbishing furnishing maintaining and repairing the vessel as the supplies are used for providing the taxable outward supply of passenger transport services specified in the exclusion clause in Section 17 (5) (aa) (i) (B) of the CGST Act - The applicant is also eligible for input tax credit on the supply of food during the cruise as the supply is an element of the outward taxable supply of passenger transport services and hence covered by the proviso to Section 17 (5) (b) (i) of the CGST Act.

Issues Involved:
1. Classification of the services rendered by the applicant.
2. Applicable rate of GST for the services rendered.
3. Eligibility of the applicant for Input Tax Credit (ITC).

Issue-Wise Detailed Analysis:

1. Classification of the Services Rendered by the Applicant:
The applicant operates a resort in Alapuzha District and uses houseboats for overnight cruises and day trips, providing meals as part of the package. The applicant contends that their services fall under SAC 996415, which pertains to "Local water transport services of passengers." According to the Explanatory Notes to the Scheme of Classification of Services under GST, Heading 996415 includes inland water cruises that encompass transportation, accommodation, food services, and other incidental services in an all-inclusive fare. The Authority for Advance Ruling (AAR) examined the details and concluded that the services provided by the applicant indeed fall under Heading 996415, thus classifying them appropriately under SAC 996415.

2. Applicable Rate of GST for the Services Rendered:
The applicable GST rate for services under Heading 9964, which includes passenger transport services, is detailed in Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. Specifically, sub-entry (vii) of SI No. 8 of this notification states that "Passenger transport services other than (i), (ii), (iii), (iv), (iva), (v) and (vi)" are subject to an 18% GST rate. Since the services rendered by the applicant fall under Heading 996415, they are covered by the aforementioned entry and are liable to GST at the rate of 18% [9% CGST + 9% SGST].

3. Eligibility of the Applicant for Input Tax Credit (ITC):
Sections 16 to 18 of the CGST Act, 2017, outline the conditions and limitations for claiming ITC. Section 17(5) specifies the list of goods and services for which ITC is not available, except under certain conditions. Vessels and food and beverages are included in this list. However, ITC is available if these items are used for providing taxable outward supplies specified in the exclusion clauses of Section 17(5). The AAR determined that the services rendered by the applicant are classifiable under SAC 9964 - Passenger transport services. Consequently, the applicant is eligible for ITC on expenses incurred for refurbishing, furnishing, maintaining, and repairing the vessel, as well as on the supply of food during the cruise. This eligibility is in line with the provisions in Section 17(5)(aa)(i)(B) and Section 17(5)(b)(i) of the CGST Act.

Ruling:
1. Classification: The services rendered by the applicant are appropriately classifiable under Heading 9964 - 996415 - Local water transport services of passengers.
2. GST Rate: The services rendered by the applicant are liable to GST at the rate of 18% [9% CGST + 9% SGST] as per entry at SI No. 8 (vii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and Notification No. 08/2017 Integrated Tax (Rate) dated 28.06.2017.
3. Input Tax Credit: The applicant is entitled to claim input tax credit subject to the conditions prescribed in Section 16 of the CGST Act, 2017.

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