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TMI Blog2024 (9) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the applicants on the ship are in the nature of supply contract and there is not scope for vivisecting the same as to separate the same into service portion i.e, maintenance, repair etc., and supply of goods portion for the purpose of applicability of the concessional rate of tax. It is observed that ,the services provided do not primarily constitute maintenance, repair, or overhaul services as envisaged in the notification, the contract is more in the nature of a works contract involving supply and installation of goods, there is no specific maintenance agreement between the applicant and the Naval Dockyard and the scope of work primarily involves up gradation and installation activities rather than repair or maintenance of existing equipment. The tender work rendered by the applicant does not fall under the scope of Entry 25(ib) of N/N. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by N/N. 02/2021 Central Tax (rate) dated 02.06.2021. - DR. K. RAVI SANKAR AND LAKSHMI NARAYANA, MEMBER Represented by : CA Vinay Gandhi ORDER (Under sub-section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017 and sub-section (4) of Section 98 of Central Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /APGST Act, 2017. 4.2. The jurisdictional officer submitted that scrutiny of returns has been initiated and proceedings have been concluded up to March 2021. No proceedings are pending related to the issue for which the advance ruling is sought. 5. Admissibility of the application:: The question raised as above appeared to fall under section 97(2)(b), (d) of CGST/SGST Act, 2017, as no proceedings on the same is pending, the application, as advance ruling is admitted. 6. Applicant's Submissions: 6.1. The applicant contends that their services may fall under the ambit of Maintenance, repair or overhaul services in respect of ships and other vessels, their engines and other components or parts as per the Entry 25 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as added by Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021 reads as follows:- 25 (ib) Maintenance, repair or overhaul services in respect of ships and other vessels, their engines and other components or parts is taxed at 2.5% CGST + 2.5% SGST. 6.2. The applicant seeks clarification on the applicability of the concessional GST rate of 5% (CGST 2.5% + SGST 2.5%) as per the amended notification. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce', `repairs' and overhaul. 8.5.1 Maintenance: Maintenance generally refers to routine, preventive care to keep equipment in good working condition. Keeping something in good condition (Oxford Dictionary). Work needed to keep road, building, machine etc. in good condition (Cambridge Dictionary). The act of keeping property or equipment in good condition (Merriam-Webster). Maintenance refers to care or upkeep, as of machinery or property, or to the means of upkeep, support, or subsistence (Dictionary.com). Maintenance is to keep a machine, building in a good condition by periodically checking and servicing or replacing. While repair is a one time activity, maintenance is a continuous process of which repairing may be incidental or ancillary. In common parlance, maintenance and overhaul means a preventive care of machinery, equipment, appliance or vehicle etc. to keep them in proper working condition or to enhance the its useful life. Maintenance involves preserving or ensuring the upkeep of a building, machine, road, etc., in good condition. It includes keeping items in working order, and there is no strict limitation to occasional replacement. 8.5.2 Repairs: Repairs have n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , inspection, testing, surveying etc. require special attention whether such services can be regarded as MRO services and reduced tax rate can be applied to it or not? Sometimes, technical consultancy or inspection is a pre-requisite for carrying out MRO services. In such as case, one may be justified in treating such services as composite supply of ship or vessel MRO services. In case of comprehensive MRO contracts (inclusive of parts, spares, components etc.), entire contract can be regarded as MRO contract eligible for concessional tax treatment. It is pertinent to note that beneficial tax treatment is given only to maintenance, repair and overhaul services provided in respect of ships, vessels, its engine and its other components and parts. The provider of ship MRO services will have to closely examine nature of their services and bifurcate it into MRO and non-MRO services. 9. Analysis: 9.1 Upon examination of the work order and tender documents, we observe that: a) The applicant does not have a specific maintenance contract with the Naval Dockyard. b) The services primarily involve supply and installation of various items such as fittings, furniture, and fixtures. c) The natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement or that the works involve restoring malfunctioning equipment to working condition. 9.10 The ship repairs if any undertaken by them are in the nature of casual repairs but not involves complete overhauling of ships including repairs and replacement. It is thus clear that the supplier rendered by the applicant to it customer are more in the nature of supply of goods or a work order. 9.11 Further as per the work order, major portion of the services are covered with supply of materials along with services. This indicates that it does not only include maintenance and repair services. Hence, the amended notification is not applicable to this case. 9.12 The repair activities carried out by the applicants on the ship are in the nature of supply contract and there is not scope for vivisecting the same as to separate the same into service portion i.e, maintenance, repair etc., and supply of goods portion for the purpose of applicability of the concessional rate of tax. 9.13 It is observed that ,the services provided do not primarily constitute maintenance, repair, or overhaul services as envisaged in the notification, the contract is more in the nature of a works contract involvi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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