2022 (7) TMI 407 - AAR - GST

Levy of GST - support services - Export of services or not - place of supply of service - taxable territory or not - whether, the supplier and recipient of the service are not merely establishments of a distinct person - vessel support services provided by the applicant to its group company outside India - HELD THAT - It is evident that 'advance ruling' are decisions on questions specified in sub-section 97(2) of the Act in relation to the supply of goods or services undertaken or proposed to be undertaken by the applicant seeking the same. In the case at hand, to determine whether the supply amounts to 'Export of Service', the 'Place of supply of service' is to be determined and 'Place of Supply' is not within the ambit of this authority as per Section 97(2) - in the case at hand, to determine whether the activity is construed to have been undertaken in the taxable territory for the purposes of GST or otherwise, it becomes necessary to examine the Place of Supply of Service', based on which the liability to pay GST by the applicant on the said service can be arrived. The applicant extends services which requires the physical presence of the vessel when inspections for certifications, docking, loading /unloading, repairs, etc are undertaken and also services of accounting, HR, procurements, etc which do not require the physical presence of the vessel. Further, it is seen that the applicant acts as 'pass through', i.e., identifies vendors, facilitates entering into agreements with such vendors, attend to payments for the services of these vendors to NSKJ, etc. The applicant is paid a consolidated Management Fees' as service charge for the above bouquet of supporting services extended by them as per their agreement. It is pertinent to note from the submissions that the applicant for the period the vessel stays in the Indian territorial waters, has calculated the pro-rata management fees and have raised GST for that portion of the Management fees as can be seen in the Tax Invoice No. 031/21-22 dated 02.01.2022. In the case at hand, the applicant being the supplier of service is located in India; the recipient of service being a company registered in Japan is located outside India; the payment for the services is received in convertible foreign exchange as seen in the FIRC furnished for the Transaction Date 29/09/2020 furnished along with the application; the supplier and recipients are entities of the group company. Thus, the conditions to be examined are whether, the supplier and recipient of the service are not merely establishments of a distinct person the 'Place of Supply' of service is outside India - In the present case, the applicant is a company incorporated under the laws of India and the service recipient group company, NSKJ is incorporated under the laws of Japan and therefore are separate persons and would not be considered as merely establishments of distinct persons . Place of Supply of Services, which are governed by Section 13 of IGST Act, 2017 - HELD THAT - The applicant supplies services, which he has classified under SAC 996759 as seen in the Export Invoice No. 030/21-22 dated 01.01.2022. SAC 996759 which is 'Other supporting Services for water transport nowhere else classified'. Thus in the self-assessment era, considering that the applicant is not here requiring the classification of the supply, it is evident that the services supplied as 'Support services' as per the agreement with NSKJ is in relation to water transport of the vessels under the maintenance of NSKJ. In extending such support service, it is stated by the applicant that they undertake various technical/operational services for the vessels either remotely or when docked; extend compliance to various statutory requirements regarding the operation of vessel; facilitate inspection; berthing of the vessel, loading and unloading. Thus, the bouquet of services rendered also includes those services which requires the physical possession of the vessel. Thus the Place of Supply of the service extended will be the place of availability of the vessel and not the place of service receiver, i.e., NSKJ, which is Japan. From a joint reading of Section 13(3) and 13(6), it is clear that the statute prescribes the location in the taxable territory where any support services requiring the physical availability of the vessel under management is supplied, then the 'Place of Supply is the location in the taxable territory in respect of that voyage of the vessel. In cases where the vessels do not enter any of the location in the taxable territory and the entire services relating to water transport of the vessels are extended in locations outside the taxable territory then, in such cases, the services extended are Export of Services .

Summary

Issues Involved:
1. Whether the vessel support services provided by the applicant to its group company outside India qualify as "Export of services" under GST.
2. Taxability of the supply of support services provided in relation to foreign vessels calling at ports in India.

Issue-wise Detailed Analysis:

1. Vessel Support Services as "Export of Services" under GST:

The applicant, a Private Limited Company registered in India, provides vessel management support services to its group company in Japan (NSKJ). These services include administrative, technical, operational, legal, compliance, and accounting services for vessels managed by NSKJ. The applicant charges a fixed management fee and sometimes acts as a pass-through for payments to third-party vendors.

To determine if these services qualify as "Export of Services" under GST, the following conditions under Section 2(6) of the IGST Act must be satisfied:
- The supplier of service is located in India.
- The recipient of service is located outside India.
- The place of supply of service is outside India.
- Payment for such service is received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person.

The applicant meets the first, second, fourth, and fifth conditions. The crucial condition to examine is the place of supply of service.

2. Place of Supply for Services Provided to Foreign Vessels:

The place of supply for services is governed by Section 13 of the IGST Act. The applicant contends that their services do not fall under Section 13(3)(a), which covers services requiring the physical presence of goods. They argue that their services are varied and do not require physical control of the vessels, thus falling under Section 13(2), making the place of supply Japan.

However, the Authority examined the nature of the services, which include technical, operational, and compliance services that sometimes require the physical presence of the vessel. Therefore, Section 13(3)(a) applies, making the place of supply the location where the services are performed. When services are supplied at multiple locations, including in the taxable territory, Section 13(6) states that the place of supply is the location in the taxable territory.

3. Taxability of Services for Vessels Calling at Indian Ports:

When foreign vessels call at Indian ports, the place of supply for those services is in India as per Section 13(6). The applicant's practice of prorating management fees and charging GST for the period the vessel is in Indian territorial waters aligns with this provision. Therefore, services provided to vessels calling at Indian ports do not qualify as "Export of Services."

4. Services for Vessels Outside India:

For vessels that do not enter Indian territorial waters, the place of supply is outside India, and such services qualify as "Export of Services."

Ruling:

1. The vessel support services provided in relation to foreign vessels sailing to other countries outside India qualify as "Export of Services" under Section 2(6) of the IGST Act, as the place of supply is entirely outside India.
2. If such vessels call at ports in India, the place of supply is in India per Section 13(6) of the IGST Act 2017, and the services rendered to those vessels do not qualify as "Export of Services."