Applicability of GST on spares supplied as part of the service job

[Guest]

Sir,

One of our client is engaged in repairs, maintenance & installation of electronics and navigational equipments in foreign ships and receives payment in USD. Mostly the place of supply of service is in Indian port.

Whether GST is applicable on the supply of spares by the company as part of the service job or should it be treated as an export?

Looking forward to hearing from you.

Thank you

[DR.MARIAPPAN GOVINDARAJAN]

In my view yes.

[Guest]

Sir,

Does it mean that IGST is applicable on such sale of service?

[Shyam Agarwal]

GST shall be payable as per Section 13(3) of IGST Act. It is not covered by second proviso of Sec.13(3). In such a Place of supply shall be location of goods at the time of provision of service. Hence, as we know that GST is consumption based taxation. Therefore, If registration of service provider and place of supply is in same state then CGST + SGST should be applicable and If in different state then IGST should be payable.

[KASTURI SETHI]

I support the views of both experts.

[CASusheel Gupta]

From the query it can be make out that the ships happen to be in Indian territorial waters.

If so, section 9 of IGST shall apply and POS shall be as per this section.

Section 9

Notwithstanding anything contained in this Act,––

(a) where the location of the supplier is in the territorial waters, the location of such supplier; or

(b) where the place of supply is in the territorial waters, the place of supply,

shall, for the purposes of this Act, be deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located.

Section 9 overrides the entire Act as far as POS is to be ascertained.

For ascertaining the POS you need to determine the distance between the ship in water to the nearest state and clients location and ascertain the C+S or I accordingly.

Though payment is received in USD, it shall not be export.

Thanks and Regards

CA Susheel Gupta

9811004443

[KASTURI SETHI]

Sh.Sushil Gupta, C.A.

Sir, Thanks a lot for enrichment of my knowledge. You have gone into depth. Nicely explained. Really appreciable.

[Guest]

Thank you Sirs for the valuable information provided.

AI Summary

Place of supply rules determine GST on spares supplied with ship repair services, not export treatment despite foreign payment. GST applies to spares supplied as part of ship repair services; place of supply is the location of the goods at the time of service under Section 13(3) of the IGST Act, and where the ship is in territorial waters Section 9 deems the place of supply to be the nearest coastal State or Union territory. Taxation follows that deeming: co located supplier and place of supply attract CGST and SGST, while differing States attract IGST. Payment in foreign currency does not make the supply an export.