Vessel support services requiring physical vessel presence in taxable territory not considered export under sections 13(3) and 13(6) IGST Act.

The AAR-TN examined whether vessel support services provided by an Indian company to its Japanese group company constitute export of services. The applicant provided technical, operational, and compliance services for vessels, including services requiring physical vessel presence and remote services like accounting and HR. The authority held that since the services included activities requiring physical vessel availability, the place of supply would be determined by the vessel's location rather than the recipient's location in Japan. Under sections 13(3) and 13(6) of IGST Act, when support services require physical vessel availability in taxable territory, the place of supply is within taxable territory. The ruling clarified that services constitute export only when vessels remain entirely outside taxable territory during service provision.

---

---

Issues Involved:
1. Whether the vessel support services provided by the applicant to its group company outside India qualify as "Export of services" under GST.
2. Taxability of the supply of support services provided in relation to foreign vessels calling at ports in India.

Issue-wise Detailed Analysis:

1. Vessel Support Services as "Export of Services" under GST:

The applicant, a Private Limited Company registered in India, provides vessel management support services to its group company in Japan (NSKJ). These services include administrative, technical, operational, legal, compliance, and accounting services for vessels managed by NSKJ. The applicant charges a fixed management fee and sometimes acts as a pass-through for payments to third-party vendors.

To determine if these services qualify as "Export of Services" under GST, the following conditions under Section 2(6) of the IGST Act must be satisfied:
- The supplier of service is located in India.
- The recipient of service is located outside India.
- The place of supply of service is outside India.
- Payment for such service is received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person.

The applicant meets the first, second, fourth, and fifth conditions. The crucial condition to examine is the place of supply of service.

2. Place of Supply for Services Provided to Foreign Vessels:

The place of supply for services is governed by Section 13 of the IGST Act. The applicant contends that their services do not fall under Section 13(3)(a), which covers services requiring the physical presence of goods. They argue that their services are varied and do not require physical control of the vessels, thus falling under Section 13(2), making the place of supply Japan.

However, the Authority examined the nature of the services, which include technical, operational, and compliance services that sometimes require the physical presence of the vessel. Therefore, Section 13(3)(a) applies, making the place of supply the location where the services are performed. When services are supplied at multiple locations, including in the taxable territory, Section 13(6) states that the place of supply is the location in the taxable territory.

3. Taxability of Services for Vessels Calling at Indian Ports:

When foreign vessels call at Indian ports, the place of supply for those services is in India as per Section 13(6). The applicant's practice of prorating management fees and charging GST for the period the vessel is in Indian territorial waters aligns with this provision. Therefore, services provided to vessels calling at Indian ports do not qualify as "Export of Services."

4. Services for Vessels Outside India:

For vessels that do not enter Indian territorial waters, the place of supply is outside India, and such services qualify as "Export of Services."

Ruling:

1. The vessel support services provided in relation to foreign vessels sailing to other countries outside India qualify as "Export of Services" under Section 2(6) of the IGST Act, as the place of supply is entirely outside India.
2. If such vessels call at ports in India, the place of supply is in India per Section 13(6) of the IGST Act 2017, and the services rendered to those vessels do not qualify as "Export of Services."

---