Appellant's services to Foreign Ship Owners ruled as composite supply with intermediary services as principal supply

The AAAR Maharashtra ruled that the appellant's services to Foreign Ship Owners constituted a composite supply of intermediary services (SAC 999799) and accounting services (SAC 998222), with intermediary service being the principal supply. The appellant was found to be acting as an intermediary facilitating vessel chartering between FSOs and charterers, rather than providing consultancy services as claimed. The authority determined that the appellant performed services on behalf of FSOs including finding charterers and administrative activities like voyage account reconciliation, clearly establishing their role as intermediaries in the vessel chartering process.

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Issues Involved:
1. Whether Marine Consultancy Service (MCS) provided to Foreign Ship Owners (FSO) constitutes "composite supply" with the principal supply of consultancy service.
2. If services are provided to FSO distinctively as consultancy and support services with separate fees:
a. Whether consultancy service qualifies as business consultancy service.
b. Whether support service qualifies as "intermediary service."

Issue-wise Analysis:

1. Composite Supply of MCS:
The appellant argued that MCS, comprising consultancy and support services, should be treated as a composite supply with consultancy as the principal service. They contended that these services are naturally bundled and supplied in conjunction with each other in the ordinary course of business. The appellant cited industry practices and the perception of service recipients to support their claim. They emphasized that both services are provided together, and the fee is a percentage of the revenue from the chartering contracts, indicating a unified service offering.

However, the appellate authority found that the appellant's activities, including introducing potential charterers and providing post-contract support, are intermediary services. The authority noted that the appellant's primary activity is to facilitate the supply of chartering services between FSO and charterers, fulfilling the criteria for intermediary services under Section 2(13) of the IGST Act. Consequently, the authority concluded that the appellant's services constitute a composite supply of intermediary and accounting services, with intermediary services being the principal supply.

2. Classification of Consultancy and Support Services:
a. Business Consultancy Service:
The appellant claimed that their consultancy service qualifies as a business consultancy service under the scheme of classification of services. They argued that the consultancy service involves providing market intelligence, trade analysis, and other advisory services to FSOs, which are essential for identifying potential charterers and optimizing vessel employment.

b. Intermediary Service:
The appellant contended that their support service does not qualify as an intermediary service. They argued that the support service is provided independently on their own account and is not for facilitating any other supply of service. The appellant emphasized that their role is limited to providing market intelligence and support services to FSOs, without any contractual obligations or interactions with the charterers.

The appellate authority disagreed with the appellant's classification. They observed that the appellant's activities, including monitoring voyage execution and examining lay time calculations, are integral to facilitating the supply of chartering services between FSO and charterers. The authority concluded that the support service qualifies as an intermediary service under Section 2(13) of the IGST Act, as it involves arranging or facilitating the supply of services between two or more persons.

Conclusion:
The appellate authority held that the appellant's services constitute a composite supply of intermediary and accounting services, with intermediary services being the principal supply. The authority classified the intermediary services under Service Accounting Code 999799 (Other Miscellaneous Services) and the accounting services under SAC 998222. The authority dismissed the appellant's claims for classification as business consultancy or support services, emphasizing the intermediary nature of the appellant's activities in facilitating the supply of chartering services between FSO and charterers.

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