Classification of houseboat cruise services under SAC 996415 for 18% GST rate and Input Tax Credit eligibility

The Authority for Advance Ruling classified the services provided by the applicant, a resort operating houseboats for cruises, under SAC 996415, "Local water transport services of passengers." The services were deemed subject to an 18% GST rate under Notification No. 11/2017 Central Tax (Rate). The applicant was found eligible for Input Tax Credit on expenses related to vessel maintenance and food supplies during cruises, in accordance with Section 17(5) of the CGST Act.

---

---

Issues Involved:
1. Classification of the services rendered by the applicant.
2. Applicable rate of GST for the services rendered.
3. Eligibility of the applicant for Input Tax Credit (ITC).

Issue-Wise Detailed Analysis:

1. Classification of the Services Rendered by the Applicant:
The applicant operates a resort in Alapuzha District and uses houseboats for overnight cruises and day trips, providing meals as part of the package. The applicant contends that their services fall under SAC 996415, which pertains to "Local water transport services of passengers." According to the Explanatory Notes to the Scheme of Classification of Services under GST, Heading 996415 includes inland water cruises that encompass transportation, accommodation, food services, and other incidental services in an all-inclusive fare. The Authority for Advance Ruling (AAR) examined the details and concluded that the services provided by the applicant indeed fall under Heading 996415, thus classifying them appropriately under SAC 996415.

2. Applicable Rate of GST for the Services Rendered:
The applicable GST rate for services under Heading 9964, which includes passenger transport services, is detailed in Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. Specifically, sub-entry (vii) of SI No. 8 of this notification states that "Passenger transport services other than (i), (ii), (iii), (iv), (iva), (v) and (vi)" are subject to an 18% GST rate. Since the services rendered by the applicant fall under Heading 996415, they are covered by the aforementioned entry and are liable to GST at the rate of 18% [9% CGST + 9% SGST].

3. Eligibility of the Applicant for Input Tax Credit (ITC):
Sections 16 to 18 of the CGST Act, 2017, outline the conditions and limitations for claiming ITC. Section 17(5) specifies the list of goods and services for which ITC is not available, except under certain conditions. Vessels and food and beverages are included in this list. However, ITC is available if these items are used for providing taxable outward supplies specified in the exclusion clauses of Section 17(5). The AAR determined that the services rendered by the applicant are classifiable under SAC 9964 - Passenger transport services. Consequently, the applicant is eligible for ITC on expenses incurred for refurbishing, furnishing, maintaining, and repairing the vessel, as well as on the supply of food during the cruise. This eligibility is in line with the provisions in Section 17(5)(aa)(i)(B) and Section 17(5)(b)(i) of the CGST Act.

Ruling:
1. Classification: The services rendered by the applicant are appropriately classifiable under Heading 9964 - 996415 - Local water transport services of passengers.
2. GST Rate: The services rendered by the applicant are liable to GST at the rate of 18% [9% CGST + 9% SGST] as per entry at SI No. 8 (vii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and Notification No. 08/2017 Integrated Tax (Rate) dated 28.06.2017.
3. Input Tax Credit: The applicant is entitled to claim input tax credit subject to the conditions prescribed in Section 16 of the CGST Act, 2017.

---