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2022 (5) TMI 1019
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.... called the Applicant) are Un-registered under GST. The applicant has sought Advance Ruling on the following questions:- 1. The Applicant would like to seek a ruling on whether the provision of specified services would qualify as "support services" under SAC 9985 of Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017. 2. The Applicant would also like to seek a ruling on whether such support services would be considered as export of services based on the present facts and circumstances. The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has referred to Section 95(a), 95(c) and 97(2) of Central Goods & Service Tax Act, 2017 and has stated that they would like to seek clarification on the questions mentioned above on the ground that they have jurisdiction to file the advance ruling since they have registered themself as a 'company' under the Companies Act, 2013 to provide services to their customers overseas and raise questions on the clas....
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.... 2.4 They have listed the primary functions which would be performed by them in India ("Specified Services") as under:- a. Handling all registration, approval, advance payments and formalities regarding the arrival and departure of the vessel towards port and Government authorities. b. Co-ordinate all activities of port, as set forth in the Agreement, in order to ensure the proper performance of all customary requirements for the operation of the service recipient's vessels in the Territory; and c. Co-ordinate with stevedores and other relevant parties, reporting to appropriate authorities and arranging and checking documentation; d. Up-to-date reporting to the Service Recipient, the vessel's position and preparing a statement of facts of the call and/or a port log providing full overview of the current status of operations. Further, providing statistics and historical information as may be reasonably requested by the service recipient; e. Attend the Master and all crew matters, consular requirements, organizing medical and dental treatment and supervising crew changes; f. Applicant will provide documentation support s....
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.... the ships/vessels when the shipment or the goods transported move into or outside India. Therefore, the scope of services is confined only with respect to the territory of India and with respect to vessel and crew related functions (day to day or otherwise). • It will not. be a continuous set of services that are provided at all times to the customers of the Applicant for their travel and transportation to different locations and ports across the world such that the services become integral to the business of the charterers/shipping lines. The support is necessary only during travel into and exiting the ports of India. Therefore, the scope of services is limited and within the boundaries of India only. Such services are in fact outsourced to them which could have normally been performed by their customers but for lack of resources or to increase efficiency, the same is contracted out to them. This gives light to the fact that the scope of services is supporting in nature. • In furtherance of this and in light of the definitions relied above, the scope of services enumerated include within its ambit accounting and processing of transactions. They also proc....
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....s and charterers where the Applicant could be classified as a 'Ship Broker'. However, it. is distinctively clear that there is only one agreement with the charterer/shipping lines, i.e. to manage their vessels effectively when in India and to provide support to that effect. The risks and rewards will also be borne completely by them when procuring said services. The specified services goes beyond providing mere logistics value to their customers and further includes documentation and administrative functions within their ambit so that the day to day vessel functions and compliance to customary laws are also met. Therefore, the proposed transaction will not satisfy the third condition necessary to fulfill the concept of an 'intermediary' under the laws of GST as well as the fact that there is no facilitation happening between the overseas charterers/shipping lines and their end customers in India. • In furtherance of this, the applicant placed reliance upon following rulings:- a. GoDaddy India Web Services Pvt Ltd [2016 (46) STR 806 (AAR)] - b. In Re: M/S. Fulcrum Info Services LLP [2019 (10) TMI 670] - • support services t....
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.... supplier of service is located in India 1. The Applicant incorporated under Indian laws is situated in India. 2. The recipient of service is located outside India 2. The recipient of services are foreign charterers/operators of water vessels situated outside India. This is in line with the definition (u/s 2(14) (d) of IGST Act, 2017) of location of recipient of Service' which provides that the same would be the usual place of residence, i.e., outside India. 3. The place of supply of service is outside India 3. The place of supply of support services to be provided to overseas customers will be as per Section 13(2) of IGST Act, 2017 i.e., the location of the recipient of services (which is outside India as explained previously). 4. The payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India 4. Payment will be received in convertible foreign exchange. 5. The supplier of service and the recipient of service are not merely establishments of a distinct person 5. The overseas customers/ charterers would not be related to the Applicant and he....
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....and stated that • They are unregistered and their questions are covered under Section 97(2)(a) and 97(2)(e) of the GST Act. The AR referred to the Kerala High Court Order in the case of Sutherland Mortgage Services Inc and stated that the question relating to "export of Service" is to be admitted. They referred to ruling extended by Maharashtra AAR, Gujarat AAR and Karnataka AAR after the Kerala High Court order on the issue of 'export of service' and stated that the AAR are accepting questions relating to 'export of service' and therefore their questions are to be admitted. • On the merits of the issue, the AR referred to the additional submissions filed vide email dated 30.11.2021. He stated that their activity is not related to cargo but to overseas shipper related to vessel (i.e) managing and supporting activity pertaining to vessels on their berthing, staying and leaving of the vessel. He stated that they are responsible for providing end to end solutions even if they engage third party as sub-contractor. He stated that their services are classifiable under the residuary category of SAC 9985 support service. • In respect o....
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....try to country) relating to vessel calls and vessel related functions when entering, berthing and exiting the ports of India and that is the bridge that they aim to cover through its bouquet of administrative and vessel management services. They will have the necessary expertise to support the business/function of the vessel during such limited time and period, but it will nonetheless offer various services so that support is fully given from an end-to-end perspective. • They would be the single point of contact for all such vessel related functions from the time it has to enter and move out of the ports and would provide timely reports and port logs so that the shipping line/charterers know exactly what is to be done and do not have to take the burden of managing any vessel function in India • Services proposed relate to the administration and management of the logistics operations of the ships/vessels while entering/leaving the Indian ports and are confined to the vessel and crew related functions. They are responsible for managing, planning, resolving and monitoring the entire activity of vessel calls through their own operations teams and service provi....
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....ping lines/charters). The appointment of third parties will not create any principal-agent relationship between the service recipient and such third parties (refer clause 5 of section I of the draft SLA). • They are liable to insure against negligent acts and undertake public liability insurance in relation to their proposed service. The service recipient is also required to maintain shipowners' protection and indemnity insurance or charterer's cover. • The entire service offering will be for a lump sum fee to the overseas shipping lines/charters where end to end support solution of vessel operations will be provided. They will not be receiving any consideration in form of agency fees. • The services provided by them are on their own account and not in the nature of intermediary services. This is explicit and clear from the scope of activities and the nature of relationship discussed above. This is also further augmented by a recently released Circular No. 159/15/2021-GST dated 20 September 2021 ('Circular') by CBIC which enumerates certain principles which help in rationalizing the fact that they are not intermediary in nature....
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....vessel and continue from the time the Vessel arrives till the time it leaves India. • The details of the end-to-end solution which includes the 'specified activities' is provided as per the scope of services at para 6 of the proposed Service Level Agreement ('SLA') and are extracted at para 10 of Exhibit II of the application dated 23 August 2021. All the activities would be provided by the applicant to their customers on a principal-to-principal basis as specified at clause 22 of the SLA. To this end, the Applicant will be contracting with the shipping lines to perform all the specified activities directly and bear the responsibility, risks and rewards of the entire transaction. • The risk of loss/damage on account of the activities that they will provide to their customers would be on their account. This is also specifically provided at clause 16 of the proposed SLA. • The Applicant will be providing all the services required with regard to the vessel as a single service provider, for a lump sum fee on a principal-to-principal basis and would not be charging any consideration in form of agency fees. They requested to be gr....
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....ntract with the customers on a Principal-to-Principal basis (P2P basis). b. Liability of third parties (Clause 5 of representative agreement) - The Applicant, as end-to-end service provider, shall be responsible for any loss or damage to the customers arising from third parties' negligent, reckless or wilful acts or omissions in the discharge of their obligations under the proposed agreement. c. Insurance (Clause 16 of representative agreement) - The Applicant has the obligation to maintain adequate and appropriate insurance cover for the performance of its service. • their proposed transaction with the vessel owners/charterers is a principal to principal transaction. All the risks and rewards of the proposed transaction are to be borne by them and a lump sum fee will be charged by them for services provided to their customers. They have relied on Supreme court ruling in case of State of Orissa and Others v. Titaghur Paper Mills Company Limited [MANU/SC/0325/1985] • the sub-contractors (appointed, as and when required, by them) have no relationship or privity with their customers. They would be responsible to their customers for the e....
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....ot currently registered under GST. • They aim to streamline and provide services in the Marine Industry by providing end to end support services to overseas shipping lines/Charterers such as crew related activities, documentation support services, administrative functions and other customary activities when entering/exiting the Indian Ports to its Foreign Clients. They will be offering support services to their customers located outside India on a Principal-to-principal basis. • The customers of the Applicant are in the business of Chartering vessels for transportation of goods into India and moving goods outside India and for the Provision of aforesaid services, they will render services to vessels/Ship owners to ensure smooth operation while the vessel/ship is in India. The Applicant's main intention is to provide end to end solution to its overseas customers in the form of assisting/supporting it while its vessel(s) arrive in India. As a result, the Proposed Company intends to supply 'support services' in line with the classification under SAC Code 9985 so that the shipping lines/Charterers are not worried about the paper work or other routi....
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....een received by the supplier of the service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8; Section 97(2) of the CGST Act / Tamil Nadu GST Act (TNGST) gives the scope of Advance Ruling Authority, i.e., the question on which the Advance Ruling can be sought. For ease of reference, the section is reproduced as under:- 97 (2) The question on which the advance ruling is sought under this Act, shall be in respect of,- (a) Classification of any goods or services or both; (b) Applicability of a notification issued under the provisions of this Act; (c) Determination of time and value of supply of goods or services or both; (d) Admissibility of input tax credit of tax paid or deemed to have been paid; (e) Determination of the liability to pay tax on any goods or services or both; (f) Whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of ....
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....tainly taken cognizance of the fact and has intended that very often applicants would require clarity and precision about various aspects of taxation in the transactions and that there should be certainty and precision in those matters, so that the applicant concerned is given the right to seek advance ruling even in such a larger issue as the one as per clause (e) of Sec. 97(2) of the CGST Act, which deals with issue of determination of liability to pay tax on any goods or services or both. 22. In cases of this nature, entities which come with foreign investment in India would also require certainty and precision about the tax liability so that they can plan an decide in advance about their functioning as business entities in India so that its efficacy is maximised so as to bring in a "win win situation" not only for such foreign entities, who are permitted to make such investments in India, but also for the economy of India. It is in the light of these dynamic scenario in the fast changing global economy that the Parliament has taken a very proactive role with a very wide vision, the Parliament in its wisdom has decided to mandate such a provision as in clause (e) of Sec....
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....personal hearing to the petitioner and should also afford a reasonable opportunity of being heard to the petitioner, through authorised representative/ counsel, if any, and then should consider all relevant aspects of the matter and should render an advance ruling in the matter in terms of Sec. 98(4) of the CGST Act, etc. The advance ruling as aforestated in terms of Sec.98(4) of the CGST Act may be duly rendered by the Advance Ruling Authority without much delay, preferably within a period of 3 to 4 months from the date of production of a certified copy of this judgment. 24. Before parting with this case, it has to be borne in mind that India is at the cusp of great global changes and there cannot be any two opinions for anyone, who cherishes the best interests for this country, that with extreme hard work and industry, we have to progress economically, socially and in all spheres of our life. It has been in the consistent policies of the various Governments, both at the Union level and at the levels of the States concerned, that foreign investments, apart from domestic investments, are also highly needed for our economy, subject to the regulatory framework projected by l....
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....ards port and Government authorities. • Co-ordinate all activities of port, as set forth in the Agreement, in order to ensure the proper performance of all customary requirements for the operation of the sei vice recipient's vessels in the Territory; and Co-ordinate with stevedores and other relevant parties, reporting to appropriate authorities and arranging and checking documentation; • Up-to-date reporting to the Service Recipient, the vessel's position and preparing a statement of facts of the call and/or a port log providing full overview of the current status of operations. Further, providing statistics and historical information as may be reasonably requested by the service recipient; • Attend the Master and all crew matters, consular requirements, organizing medical and dental treatment and supervising crew changes; • Applicant will provide documentation support service by issuing such documents as may be needed for customary requirements for in inward/outward movement of the Service Recipient's vessels. • Order and receive goods, services and supplies for the vessel; Make arrangements for receivin....
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....es other than (i) and (ii) above. 9 - As per Annexure to the said Notification, which gives the scheme of classification, the Heading 9985 covers the following services: Annexure: Scheme of Classification of Services S.No. Chapter, Section. Heading or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 400 Heading 9985 Support services 401 Group 99851 Employment services including personnel search, referral service and labour supply service 402 998511 Executive or retained personnel search services 403 998512 Permanent placement services, other than executive search services 404 998513 Contract staffing services 405 998514 Temporary staffing services 406 998515 Long-term staffing (pay rolling) services 407 998516 Temporary staffing-to-permanent placement services 408 998517 Co-employment staffing services 409 998519 Other employment and labour supply services nowhere else classified 410 Group 99852 Investigation and security serv....
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.... 998591 Credit reporting and rating services 446 998592 Collection agency services 447 998593 Telephone-based support services 448 998594 Combined office administrative services 449 998595 Specialised office support services such as duplicating services, mailing services, document preparation and the like 450 998596 Events, exhibitions, conventions and trade shows organisation and assistance services 451 998597 Landscape care and maintenance services 452 998598 Other information services nowhere else classified 453 998599 Other support services nowhere else classified Thus, it is evident that the Heading 9985 covers 'Support Services'- • Employment services including personnel search, referral service and labour supply service; • Investigation and security services • Cleaning services • Packaging services • Travel arrangement, tour operator and related services • Other support services The services proposed to be provided by t....
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.... services proposed by the applicant covers all the services specified in this Group 99675, which also has an entry accommodating 'other supporting services' under 996759. In as much as the services proposed to be undertaken can be classified under a particular group'99675', the said services do not fall under 'SAC 9985-other n.e.c'. Therefore, the services proposed being relatable to the presence of the Vessel of the shipper in the Indian Port, i.e., entry/exit of the vessel in the port and the liaison/documentation and support for such transport in and out of the port, we hold that the services are rightly classifiable under SAC 9967. The applicable rate is provided under Sl.No.11(ii) below: 11 Heading 9967 (Supporting services in transport) (i) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use). Explanation.- "goods transport agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. 2.5 Provided that credit of input tax charged on goods and services used in supplying the service....
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.... of the ships/vessels while entering /leaving the ports of India; the services are provided to persons located outside India and is undertaken on a Principal to Principal basis and not as an Intermediary. Therefore, their claim is that, the Place of Supply for the proposed supply is the place of recipient of such service, which is outside India. 9.3 From the submissions, it is evident that the proposed services are in the nature of 'Support Services' rendered for facilitating the vessel of the service recipient to enter/exit the Indian Port. The proposed services as listed in Para 8.1, shows that the activities proposed to be undertaken are,- • facilitating/obtaining required registrations, approvals, formalities regarding the arrival & departure of the vessel in the Indian territory; • ensure proper performance of all customary requirements for the operation of the service recipients' vessel in the territory; • attending to the requirements of Master and crew; • Making arrangements for supply of bunker fuel, etc for the vessel; • Coordinate repairs & perform all activities to support the day to day run....