9911796707
TMI Blog2022 (7) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... GST with GSTIN33AAHCN0274F1ZR. The applicant has sought Advance Ruling on the following question:- Whether the vessel support services provided by the applicant to its group company outside India qualify as "Export of services" under GST? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/-each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are a Private Limited Company registered in India and is engaged in providing support services relating to vessel management to its group company, namely New Shipping Kaisha Ltd, Japan (hereinafter referred to as "NSKJ"), a company registered under the laws of Japan, for the vessels managed by NSKJ. NSKJ manages vessels which are carrying the country flag of Panama (7 vessels) and the British Cayman Islands (3 ships). These ships are foreign going vessels, and on a world-wide route. During their voyage, these ships can be stationed at various ports and seas around the world, and on occasions also call Indian ports. In this regard, NSKI has entered into a contract with NS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs deployed by NSKI. Appendix A to the MSA, which stipulates the nature of services as agreed by NSKI to be provided to NSKJ which includes,- * General administrative services/ administrative supervision for the vessels managed by NSKJ. * Full technical operational and logistical support to vessels managed NSKJ as per the instructions of NSKJ. * Payment services including making payments to vendors and other service providers, for vessels managed by NSKJ. * Management of crew members * Accounting, billing and collection services including preparation of MIS for vessels managed by NSKJ * Legal and compliance services including liaison/ coordination with authorities of respective jurisdiction in relation to the vessels managed by NSKJ. Further, the applicant has stated that the management fee charged by them can be categorized into the following scenarios.- i. Management fee for the support services provided in relation to the foreign flag ships when outside India. ii. Management fee for the support services provided in relation to foreign flag vessels temporarily calling a port in India 2.4 Scenario:1 Management fee for the support services provided in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot directly doing or performing any work on the vessels. Rather, they are providing a bouquet of services of varied nature in order to provide support to such vessels. Further, services like administrative advisory support, accounting, payment related services, legal compliance and liasoning etc. does not require physical control of the goods, i.e. the services in question can and in fact, are being performed without having the actual possession of the goods. Also, the services are being supplied directly from its location in India by managing the affairs of vessels in terms of the agreement entered with NSKJ. As per the above cited explanation of the guidance note of educational guide, it is clear that Section 13(3)(a) shall not cover cases where supply of goods is not material for rendering the service. Hence, the gamut of services performed by the applicant are not specifically covered under Section 13(3)(a). Further, their case is also not covered by any of the other subsections of Section 13(3). Hence, it can be inferred that the place of supply of services provided by them shall be the location of the recipient in terms of the general provision as contained under Section 13(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first scenario of the applicant. * Hence, the applicant has stated that as per the definition of zero-rated supplies under Section 16(1) of IGST Act, their services made under the first scenario will fall under zero-rated supplies in terms of Section 16(1) of IGST Act. 2.5 Scenario 2: Management fee for the support services provided in relation to foreign vessels calling at the port in India.:- * The applicant has stated that as explained in first scenario to qualify as "export of services" under Section 2(6) of the IGST Act, all conditions mentioned therein have to be fulfilled. They have stated that all the conditions specified in Section 2(6) of the IGST Act is satisfied in the second scenario, thus the service rendered by applicant is zero rated supply in terms of Section 16(1) of IGST Act. * The Applicant has stated that to determine the taxability of the supplies made by NSKI to NSKJ in the second scenario, it is imperative for the Authority to decide whether the same falls under "export of services" as prescribed under Section 2(6) of IGST Act or not. The applicant has relied upon the case law Sutherland Mortgage Services INC Vs Principal Commissioner cited at 2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to how the claim for determination of the nature of service supplied as 'export of service' which depends on the place of supply is within the ambit of this authority. It was intimated that the admissibility shall be decided on receipt of the above particulars. 3.2 The applicant did not submit the details/documents called for during the aforesaid hearing. Hence a notice was issued on 14.12.2021 and again reminded on 05.01.2022 to submit the documents required in the hearing held on 09.11.2021. 3.3 In furtherance to the aforesaid notice, the applicant vide their letter dated 10.01.2022 (received on 28.01.2022) submitted the following:- * Clarification on export of service: The applicant has stated that they have filed the application in order to clarify if the support services provided by them to their foreign parent company can be treated as "export of services", for which the supply has to satisfy the conditions specified in Section 2(6) of the IGST Act 2017. They have referred to CBIC Circular No. 161/17/2021 GST dated 20.09.2021. & requested to validate the conclusion that the supply would be covered under "Export of Services" * Nature of services: The applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing collected and paid accordingly. The case has been explained in detailed with an example. They furnished invoice for the month of January 2022 i.e. both Export invoice and pro-rate tax invoice for the above mentioned period, GSTN reports for the month of January. * With regard to provision of service they have informed that they are providing both kind of services to NSKJ (the recipient) i.e. on Principal-to-Principal basis and also on pure agent basis. The Principal-to-Principal basis service comprises of the management, logistical support services, crew management and other necessary technical services for which NSKI charges NSKJ a fixed sum of $7800/- per vessel per month as management fee. Further, NSKI facilitates payment to third party vendors who provide services to NSKJ for their operations of the vessels on pure agent basis. For this NSKI receives a budgeted amount from NSKJ on monthly basis. Based on the instruction of NSKJ the payments to third party will be discharged for their services rendered on pure agent basis. At the end of the month any surplus amount available with NSKI will be transferred to NSKJ or carried forward to meet subsequent month's operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andatory for vessels to sail in the international waters. The applicant will ensure the procedural requirement by making an application to the authorized certification organisations through proper channel, once the application is made online the said authority will proceed with the inspections or audit and will certify the vessels appropriately. In the process of application, the applicant ensures that the vessel/container fulfil/satisfy all the conditions specified in the checklist/application. Further, it would facilitate the inspection authority to carry out their statutory function and issue the requisite certification required under the International Maritime Act/Law and such other laws applicable. The responsibility center to obtain the legal certification for vessels vests with the applicant. * They furnished copies of the essential certificates provided by PANAMA MARITIME AUTHORITY and Class NK NIPPON KAMI KYOKAI to the vessels owned by NSKJ(ORIENTAL COSMOS IMO 9800049) for which applications were made by them. * The process of pure agent services/reimbursement services provided by NSKI to NSKJ:- * NSKI would calculate the budgeted operating expenses for all the vesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank of India; and v. The supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in Section 8: In the instant case, the conditions specified in 1, ii, iv, and v are satisfied, whereas in respect of condition iii, which requires place of supply of service to be outside India, it is seen from the submissions of the applicant that M/s. New Shipping Kaisha Ltd., Japan manages vessels which are carrying the country flag of Panama (7 vessels) and the British Cayman Islands (3 ships) are foreign going vessels, and on a world-wide route. During their voyage, these ships can be stationed at various ports and seas around the world, and on occasions also call on Indian Ports. In this regard, M/s. NSK Ship Management Pvt. Ltd. has entered into a contract with M/s. New Shipping Kaisha Ltd., Japan for providing various support services in relation to these vessels to M/s. New Shipping Kaisha Ltd., Japan, either by itself or through various outsourced vendors, whether in or outside India. Section 13(3)(a) of IGST Act, 2017 provides that in case of services supplied in respect of goods which are required to be made phy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplier of service is located in India; (ii) the recipient of the service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has received by the supplier of the service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8; Section 97(2) of the CGST Act / Tamil Nadu GST Act (TNGST) gives the scope of Advance Ruling Authority, i.e., the question on which the Advance Ruling can be sought. For ease of reference, the section is reproduced as under:- 97 (2) The question on which the advance ruling is sought under this Act, shall be in respect of,- (a) Classification of any goods or services or both; (b) Applicability of a notification issued under the provisions of this Act; (c) Determination of time and value of supply of goods or services or both; (d) Admissibility of input tax credit of tax paid or deemed to have been paid; (e) Determination of the liability to pay tax on any goods or services or both; (f) Whether applicant is required to be registered; (g) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med into the overarching umbrella of the goods and sales tax regime introduced by the Parliament and the Parliament would have certainly taken cognizance of the fact and has intended that very often applicants would require clarity and precision about various aspects of taxation in the transactions and that there should be certainty and precision in those matters, so that the applicant concerned is given the right to seek advance ruling even in such a larger issue as the one as per clause (e) of Sec. 97(2) of the CGST Act, which deals with issue of determination of liability to pay tax on any goods or services or both. Further, it is observed in the same decision, that,- 24. Before parting with this case, it has to be borne in mind that India is at the cusp of great global changes and there cannot be any two opinions for anyone, who cherishes the best interests for this country, that with extreme hard work and industry, we have to progress economically, socially and in all spheres of our life. It has been in the consistent policies of the various Governments, both at the Union level and at the levels of the States concerned, that foreign investments, apart from domestic investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice Description 1 Administration Service Identification of suitable vendors, vendor finalisation, collation of quotation from various vendors, short listing of vendors, facilitating payment to vendors etc. 2 Human Resources Appointment of appropriate staff on Board the vessel, payroll management, recruitment, termination and other services covering Human Resource Management 3 Technical operational services Virtual Engineering Consultancy, Marine Engineering Consultancy in case of any technical or operational issues and other similar services 4 Legal & Representative services Appointment of accountants, lawyers, auditors any other professionals for various compliances. 5 Accounting, billing services Book keeping services including, reconciliation and creditors management 6 Any other similar services Any other services to the above specified services as and when required by NSKJ They have further stated that the Technical operational services are extended on board the vessel remotely during its voyage or when the vessel is docked. The legal / compliance services provided by them includes drafting of agreements, facilitating NSKJ when entering into contracts with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual position, the taxability of the supply provided when the foreign vessels calls at dock of (i) countries outside India; and (ii) at the port of India are examined. 9.1 The taxability of the supply can be arrived at depending on whether the supply amounts to export of services. 'Export of Service' is defined under Section 2(6) of the IGST Act, 2017 as follows:- (6) "export of services" means the supply of any service when,- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India ; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with EXPLANATION 1 in section 8; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but are providing a bouquet of services of varied nature in order to provide support to such vessels and are being performed without having actual possession and hence, are not specifically covered under Section 13(3)(a). They have further contended that their case is not covered by any other sub-sections of Section 13(3) and therefore in terms of the general provisions as contained in Section 13(2) of the Act, the place of supply rendered by them will be Japan, which is a place outside India. 9.4 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 before us 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 remot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Management fee of the vessel for the month of January 2022 =$7800.00 Value of Supply which is considered as Export of services since the POS is Overseas (03.01.2022 to 31.01.2022) =$7800*28/30@=$7280.00 Value of Supply which is considered as Taxable since the POS is Gujarat (01.01.2022 to 02.01.2022) =$7800*02/30=$520.00 IGST paid on the above =$520*18%=$94.00 They have accordingly raised Tax Invoice/Export Invoice as furnished before us. However, as per the provisions of Section 13(6) of the IGST Act discussed in Para 9.4 above, when services requiring the physical availability of the vessel is supplied in taxable territory along with other non-taxable locations, the "Place of Supply" will be the "Location in the Taxable territory". Accordingly, in cases, when the vessel under management calls on the 'taxable territory', then the place of supply of service in respect of that vessel under management, is the location in the taxable territory and the services rendered in respect of that vessel is not covered under "Export of Service". 9.6 In cases where the vessels do not enter any of the location in the taxable territory and the entire services relating to water ..... X X X X Extracts X X X X X X X X Extracts X X X X
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