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TMI Blog2022 (7) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... cant 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 payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . - TN/26/ARA/2022 - - - Dated:- 30-6-2022 - SHRI T.G. VENKATESH, I.R.S., AND TMT K. LATHA., M.SC., (AGRI), MEMBER, Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. NSK SHIP MANAGEMENT PRIVATE LIMITED, 447-482, Khivraj Complex-I, 3rd Floor, Anna Salai, Chennai-600035 (hereinafter called the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also referred to Clause (6), (14) and (15) of Section 2 of IGST Act which defines export of services, location of recipient of Services and location of supplier of services respectively. The applicant has also relied on Section 13, 13(2) and 13(3)(a) of IGST ACT to determine the place of supply of service where either location of supplier or recipient is outside India. 2.3 They have stated that details of nature of services, terms and conditions related to the contract including the scope of work, approvals, payment related terms etc., as agreed between NSKI and NSKJ are available in the Master Service Agreement (MSA). They have also stated that vide Section 1(a) of the MSA, NSKI has agreed to provide vessel management services to NSKJ in a manner and to the extent as specified in each statement of work (SOW). Further vide Section 1(b) and 1(c) of the MSA, NSKJ has agreed to pay NSKI the fee as set forth in each SOW and also agreed to reimburse NSKI for all reasonable out-of pocket expenses incurred in connection with provision of services, subject to approval by NSKJ. Section 8 of the MSA provides that NSKI shall render services as per the instructions of NSKJ and NSKJ shall ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice to be outside India. Section 13 of the IGST act determines the place of supply of services where either the location of supplier or the location of recipient is outside India. Section 13(3) (a) is relevant for the present submissions. It provides that in case of services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of supplier of services in order to provide the services, the place of supply of the said services shall be the location where the services are actually performed. They have stated that the above inference is based on the provisions of the erstwhile Service Tax Law and CBEC's Education Guide on Taxation of Services' and that Section 13(3) of the IGST Act 2017, covers those services which are directly provided or applied on the goods like repair, reconditioning etc. which temporarily come into physical control or possession of the service provider, and without happening of which, the service cannot be rendered. In such cases, the place of provision of such services shall be the location where such services are actually performed. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with explanation 1 to Section 8 of the IGST Act. In accordance with the explanation 1 to Section 8 of the IGST Act the NSKI and NSKJ are group companies and not mere establishments. They have relied on the decision of Hon'ble Gujarat High Court in Linde Engineering India Pvt Ltd vs Union of India cited at 2020-VIL-349-GUJ-ST, wherein the High Court held that services rendered by the petitioner company to its parent company would have to be considered export of service . The above decision is squarely applicable to their case as the definitions and conditions of export of Service under erstwhile Service Tax laws and GST are para materia. They have also relied upon the Order in Appeal No. 52/JC/Central Tax/ Appl-l/Delhi/2019 dated 09.03.2021 passed by the GST Appellate Authority in the case of M/s Transformative Learning Solutions Pvt Ltd, wherein the Appellate Authority upheld the appellants view that both the group companies are separate legal entities and can be said to be 'related persons' under GST law. In view of the above facts, the applicant has stated that NSKI and NSKJ being group companies do not fall under the ambit of mere establishments of a distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to clarify Whether the vessel support services provided by them to its group company outside India qualify as Export of services under GST. 3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 09.11.2021. CA. Vinay Chordia, the Authorised Representative (AR) appeared for the hearing and reiterated the written submissions. He invited the attention to the CBIC Circular No.08/2021 dated 20.09.2021 which clarifies issues relating to export of services-condition (v) Section 2(6) of the IGST Act. He stated that their supply is 'Export of Services', as per definition under Section 2(6) of IGST Act. He stated that the question raised is covered under Section 97(2)(e) of the GST Act. The AR was asked to give a detailed write up on the nature of services provided; basis for charging; bills raised (Bill of Supply/ Export Invoices). He was also asked to furnish on the clarification sought in light of the circular referred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g place. The applicant was asked to furnish a write up on,- i. as to how they charge for the services when place of supply is 'in India' and the basis of charging ii. their role in the provision of service-whether it is on the Principal to Principal basis/agent along with the situations/substantiating documents. 4.2 The applicant did not furnish the documents called for during the hearing held on 03.02.2022 a letter was issued on 02.03.2022 to furnish the documents required in the hearing. The applicant vide their letter dated 07.03.2022 received on 15.03.2022 furnished that:- They track the movement of the vessel through a software known as 'Navtracker' which facilitates them by tracking the entire voyage information of each vessel. In addition to that the Captains/Owner of each respective vessel will update a report known as 'Noon Report' every single day which contains the exact location of the vessel, the direction of movement etc. These reports will help the Management to know the exact moment when the vessels enter the Indian Territorial limit (12 nautical miles from the coasts of India). With the above mentioned information they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f services rendered. The AR replied that they are providing payments to vendors, payment facilitation and identification of vendors. The Member asked the AR to submit specific details on such services and if they are rendered as a part of management services or against the budgeted payment received, if so the details of such services with the trail of accounting documents such as agreement, PO, Invoice raised by Vendor on NSKJ and the accounting of such activities in the books of NSKI. 5.2 The applicant was addressed on 18.05.2022 to furnish the documents called for during the Virtual Hearing. The applicant vide their letter dated 29.05.2022 furnished the following facts/ documents:- Legal services provided by the applicant to NSKJ: As per appendix A of the Master Service agreement, the applicant agrees to provide various support services to NSKJ which is in point no. 6 of the MSA. The same is give below: 6. Legal and compliance services including liaison/coordination with authorities of respective jurisdictions in relation to the vessels managed by NSKJ The details of legal / compliance services provided by them includes drafting of agreements, facilita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue purchase order to the vendor . The vendor will deliver the required articles/goods or provision of services to the vessel. Once the operations are completed the vendor will raise invoice to NSKJ for payment with care of the NSKI. On approval from NSKJ, NSKI will make payment to respected vendor from the budgeted payment received. At the end of the month, in case there is any amount remaining out of the budgeted amount received, the same will be either paid back to NSKJ or will be carried forward to meet the requirement of subsequent months as per the instructions of NSKJ. The applicant has furnished complete trail of particular transaction carried out during the month of February 2022 for the vessel Oriental Margerite (IMO: 9407201) 6.1 The central Jurisdictional authority who has administrative control over the applicant has furnished the following comments: To qualify the service rendered by the taxpayer as export of services the conditions as envisaged in clause (6) to Section 2 of IGST Act 2017 should be fulfilled, which are given below:- i. The supplier of service is located in India; ii. The recipient of service is located outside Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of services. 6.2 The State Jurisdictional authority has submitted that there are no pending proceedings in the applicant's case in their jurisdiction. 7.1 We have carefully considered the application, additional submissions made in pursuance of the virtual personal hearings and the remarks of the Jurisdictional Officers. The applicant seek clarification of whether the support services provided by them to their group company outside India qualify as export of services under GST. They have stated that they supply various support services to their Group Company, NSKJ in relation to the foreign ships trading worldwide and sometimes also calling India. They have stated that the services proposed relates only to the vessel under their Management. They have sought ruling on the following questions:- 1. The taxability of the supply of support services provided in relation to foreign vessels calling at the dock of other Countries outside India 2. What if, the foreign vessels are calling at the port in India? 7.2 The admissibility of the above questions before this authority is prima-facie discussed. The applicant has sought clarification as to whether the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as follows:- 21. A reading of clauses (a) to (g) of sub section (2) of Sec. 97 of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of sub section (2) of Sec. 97 and all those clauses other than clause (e) thereof, are in specific terms. Whereas clause (e) of sub section (2) of Sec. 97 of the CGST Act clearly mandates that the larger issue of determination of liability to pay tax on any goods or services or both would also come within the ambit of the questions to be raised and decided by the Advance Ruling Authority on which advance ruling could be sought and rendered under the said provisions. Whereas Clauses (a), (b), (c), (d), (f) (g), ie. the clauses other than clause (e), are in specific pigeon holes and the provision as per clause (e) of sub section (2) of Sec. 97 is in wide terms and the Parliament has clearly mandated that the latter issue of determination of liability to pay tax on any goods or services or both, should also be matters on which the applicant concerned could seek advance ruling from the Advance Ruling Authority on which the said authority is obliged to render answers thereto . The Parliament has made the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Hence, applying the ratio of the above decision of Kerala High Court the Questions raised by the applicant is taken up for consideration on Merits. 8.1 The facts of the case as per the submissions of the applicant are that they are a Private Limited Company registered in India and is engaged in providing support services relating to vessel management of the vessels managed by its group company, New Shipping Kaisha Ltd, Japan, a company registered under the laws of Japan. NSKJ manages vessels which are carrying the country flag of Panama (7 vessels) and the British Cayman Islands (3 ships) and the applicant extends the support services to NSKJ in managing these vessels as per their contract with NSKJ, either by themselves or through various outsourced vendors, whether in or outside India. NSKI charges a fixed management fee of USD 7200/- per month per vessel for providing these s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of vessels, submitting MIS reports, documents submissions at the ports, submission of loading/unloading documents both within and outside India. With regard to the services rendered in the capacity of pure agent, it is stated that they are providing payments to vendors, payment facilitation and identification of vendors, for which no separate charges are paid to them; it is stated that they have a separate bank account for receiving the payments due to the vendors from NSKJ, which is paid and settled month-wise; the current application seeks on the liability with regard only to the 'Management Fees' received by them and is not on as to whether the payment services rendered by them is in the capacity of 'Pure agent' and accordingly, the analysis of support services rendered for which the 'Management fees' are received by the applicant alone is taken up for consideration. 8.3 From the foregoing, it is evident that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows:- Explanation l.- For the purposes of this Act, where a person has,- (i) an establishment in India and any other establishment outside India; (ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons. CBIC vide Circular No. 161/17/2021-GST dated 20th September 2021, also relied on by the applicant, has clarified that,- 5.1 In view of the above, it is clarified that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India, which is also referred to as foreign company under Companies Act, are separate persons under CGST Act, and thus are separate legal entities. Accordingly, these two separate persons would not be considered as merely establishments of a distinct person in accordance with Explanation 1 in section 8 In the present case, the applicant is a company incorporated under the laws of India and the service r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the place of service receiver, i.e., NSKJ, which is Japan as per Section 13(3)(a) of the act, which states as: (3) The place of supply of the following services shall be the location where the services are actually performed, namely:- (a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services: Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services: Further, it is pertinent to note that Section 13(6) of the Act states as (6) Where any services referred to in sub-section (3) or sub-section (4) or subsection (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory. 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 ph ..... X X X X Extracts X X X X X X X X Extracts X X X X
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