SHIP REPAIR SERVICE THROUGH SUB CONTRACTOR

[SOPL SOPL]

Dear Sir / madam

We received work order for repair and maintenance services to ships and their parts , components thereof.

We subcontracted this work to some other third party.

Third party raise invoice to us and we raise invoice to shipping company.

Read with Notification No. 02/2021- Central Tax (Rate) dated 2nd June , 2021 --

1) Can the subcontractor raise invoice @ 5%?

2) Can we raise invoice @ 5% on shipping company?

Kindly advise with relevant case laws ,circulars,advance rulings etc., if any.

[KASTURI SETHI]

Answer is YES. You must fulfill the condition laid down in notification. What has created doubt in your mind ? When law is clear, you do not need to take shelter of any circular.

[SOPL SOPL]

Sir

My doubt is, we are not directly providing the ship repair and maintenance service.

We are indirectly providing the same through the sub contractor.

Is there any case law which says that the nature of the service won't change even if service is provided through sub contractor?

Since 5% is a beneficial Gst rate given by government to boost ship repair industry , whether this needs to interpreted narrowly or widely?

Sir, required detailed analysis.

[SOWMYA CA]

Sir,

As I understand your query, you are rendering job work services to a shipping company and you have sub-contracted the work to another contractor. As per the Notification No. 2/2021 dated 2-June-2021, the rate of GST to be charged is @5%. The service rendered by the sub-contractor to the main contractor being maintenance, repair and overhaul services in respect to ships, is identical to the service rendered by the main contractor to the shipping company, the rate to be charged by both of them would be 5% only. Also as per Sr No. 12 in the press release of the 25th meeting of GST council held at New Delhi on 18/01/2018, proposed that the rate of GST applicable to the main contractor should be levied by sub-contractor. However the said sl. No. 12 is for works contract services. In my view 5% needs to be charged by both the main contractor and sub-contractor.

[KASTURI SETHI]

A sub-contractor works for and on behalf of the main-contractor. It cannot be denied. Presumably, you have executed contract/agreement with your sub-contractor. De facto you are providing repair & maintenance service to the shipping company. It is not job-work at all. There is a separate Heading for repair and maintenance service and specifically concessional rate of tax @ 5% is available to the service supplier subject to non-availment of ITC. As per the definition of Works Contract Service under GST, WCS is not in picture here. Only repair & maintenance service to ships, vessels etc. is in picture for which Govt. has provided concessional rate of 5%.

[KASTURI SETHI]

For more information go through the following decision of AAR Kerala:-

[Pl. note that notification in question is dated 2.6.21 whereas the decision of AAR was paased on 25.5.21]

2021 (7) TMI 533 - AUTHORITY FOR ADVANCE RULING, KERALA - IN RE : SOUTH INDIAN FEDERATION OF FISHERMEN SOCIETIES

[KASTURI SETHI]

As per the following decision of AAR (Maharashtra), the activity of repair is not job-wok.

Re : S.B.Shellers (P) Ltd. reported as 2021 (10) TMI 1160 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA

[SOPL SOPL]

Thank you for your valuable inputs.

Sir, as per the notification, 5% gst rate is with input tax credit.

[SOPL SOPL]

Dear Sir

Input tax credit is allowed under serial no.25 ,Heading 9987 for items -- (ia),(ib) and (ii).

Input tax credit is not allowed only under item (i).

Kindly confirm.

[KASTURI SETHI]

I stick to my reply at serial no.4 above Punctuation marks _ " have been used in the Notification No.2/21-CT(R) dated 02.6.21.

A dash is used to separate words or a group of words whereas a hyphen mark is used to link/join words or a group of words. The purpose of both these sign is exactly the opposite.

Inverted commas are used to enclose the exact words of a speaker or a quotation. These are used for other purposes also.

AI Summary

Concessional GST rate for ship repair services applies to both main contractor and subcontractor, subject to notification conditions. Concessional GST under Notification No. 02/2021-CT(R) applies to ship repair and maintenance services supplied by a main contractor and by subcontractors performing identical repair services, provided the notification's conditions are met; repair activity is distinct from job-work or works contract classification. Input tax credit availability depends on specific entries in the notification and suppliers must comply with the notification's ITC conditions before applying the concessional rate.