TaxTMI 
TaxTMI 
2022 (7) TMI 407
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....plicant or NSKI) are registered under GST with GSTIN33AAHCN0274F1ZR. The applicant has sought Advance Ruling on the following question:- Whether the vessel support services provided by the applicant to its group company outside India qualify as "Export of services" under GST? 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 stated that they are a Private Limited Company registered in India and is engaged in providing support services relating to vessel management to its group company, namely New Shipping Kaisha Ltd, Japan (hereinafter referred to as "NSKJ"), a company registered under the laws of Japan, for the vessels managed by NSKJ. NSKJ manages vessels which are carrying the country flag of Panama (7 vessels) and the British Cayman Islands (3 ships). These ships are foreign going vessels, and on a world-wide route. During their voyage, these ships can be stationed at various ports and seas around the world, and on occasions also call Indian ports. In this....
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....hall have the right to remove/replace the staff members deployed by NSKI. Appendix A to the MSA, which stipulates the nature of services as agreed by NSKI to be provided to NSKJ which includes,- • General administrative services/ administrative supervision for the vessels managed by NSKJ. • Full technical operational and logistical support to vessels managed NSKJ as per the instructions of NSKJ. • Payment services including making payments to vendors and other service providers, for vessels managed by NSKJ. • Management of crew members • Accounting, billing and collection services including preparation of MIS for vessels managed by NSKJ • Legal and compliance services including liaison/ coordination with authorities of respective jurisdiction in relation to the vessels managed by NSKJ. Further, the applicant has stated that the management fee charged by them can be categorized into the following scenarios.- i. Management fee for the support services provided in relation to the foreign flag ships when outside India. ii. Management fee for the support services provided in relation to fo....
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....rovision of such services shall be the location where such services are actually performed. In the instant case, going by the nature of services as envisaged in the MSA, they are not directly doing or performing any work on the vessels. Rather, they are providing a bouquet of services of varied nature in order to provide support to such vessels. Further, services like administrative advisory support, accounting, payment related services, legal compliance and liasoning etc. does not require physical control of the goods, i.e. the services in question can and in fact, are being performed without having the actual possession of the goods. Also, the services are being supplied directly from its location in India by managing the affairs of vessels in terms of the agreement entered with NSKJ. As per the above cited explanation of the guidance note of educational guide, it is clear that Section 13(3)(a) shall not cover cases where supply of goods is not material for rendering the service. Hence, the gamut of services performed by the applicant are not specifically covered under Section 13(3)(a). Further, their case is also not covered by any of the other subsections of Section 13(3). Henc....
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.... that NSKI and NSKJ being group companies do not fall under the ambit of mere establishments of a distinct person, thus, the last condition of Section 2(6) of IGST Act also stands satisfied in the first scenario of the applicant. • Hence, the applicant has stated that as per the definition of zero-rated supplies under Section 16(1) of IGST Act, their services made under the first scenario will fall under zero-rated supplies in terms of Section 16(1) of IGST Act. 2.5 Scenario 2: Management fee for the support services provided in relation to foreign vessels calling at the port in India.:- • The applicant has stated that as explained in first scenario to qualify as "export of services" under Section 2(6) of the IGST Act, all conditions mentioned therein have to be fulfilled. They have stated that all the conditions specified in Section 2(6) of the IGST Act is satisfied in the second scenario, thus the service rendered by applicant is zero rated supply in terms of Section 16(1) of IGST Act. • The Applicant has stated that to determine the taxability of the supplies made by NSKI to NSKJ in the second scenario, it is imperative for the Authority....
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.... raised (Bill of Supply/ Export Invoices). He was also asked to furnish on the clarification sought in light of the circular referred by him. It was emphasized that place of supply is not under the ambit of Advance Ruling Authority. The AR was also asked to furnish as to how the claim for determination of the nature of service supplied as 'export of service' which depends on the place of supply is within the ambit of this authority. It was intimated that the admissibility shall be decided on receipt of the above particulars. 3.2 The applicant did not submit the details/documents called for during the aforesaid hearing. Hence a notice was issued on 14.12.2021 and again reminded on 05.01.2022 to submit the documents required in the hearing held on 09.11.2021. 3.3 In furtherance to the aforesaid notice, the applicant vide their letter dated 10.01.2022 (received on 28.01.2022) submitted the following:- • Clarification on export of service: The applicant has stated that they have filed the application in order to clarify if the support services provided by them to their foreign parent company can be treated as "export of services", for which the suppl....
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.... help the Management to know the exact moment when the vessels enter the Indian Territorial limit (12 nautical miles from the coasts of India). With the above mentioned information they are able to determine the total management & support fee which will be apportioned based on the number of days the vessel has been in Indian Territory and IGST is being collected and paid accordingly. The case has been explained in detailed with an example. They furnished invoice for the month of January 2022 i.e. both Export invoice and pro-rate tax invoice for the above mentioned period, GSTN reports for the month of January. • With regard to provision of service they have informed that they are providing both kind of services to NSKJ (the recipient) i.e. on Principal-to-Principal basis and also on pure agent basis. The Principal-to-Principal basis service comprises of the management, logistical support services, crew management and other necessary technical services for which NSKI charges NSKJ a fixed sum of $7800/- per vessel per month as management fee. Further, NSKI facilitates payment to third party vendors who provide services to NSKJ for their operations of the vessels on pure ....
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....coordination with authorities of respective jurisdictions in relation to the vessels managed by NSKJ" • The details of legal / compliance services provided by them includes drafting of agreements, facilitating NSKJ when entering in to contracts with vendors, obtaining various certificates such as Ship Equipment Certificate, Radio Certificate, Construction Certificate, etc., which are mandatory for vessels to sail in the international waters. The applicant will ensure the procedural requirement by making an application to the authorized certification organisations through proper channel, once the application is made online the said authority will proceed with the inspections or audit and will certify the vessels appropriately. In the process of application, the applicant ensures that the vessel/container fulfil/satisfy all the conditions specified in the checklist/application. Further, it would facilitate the inspection authority to carry out their statutory function and issue the requisite certification required under the International Maritime Act/Law and such other laws applicable. The responsibility center to obtain the legal certification for vessels vests with the....
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....ts: To qualify the service rendered by the taxpayer as "export of services" the conditions as envisaged in clause (6) to Section 2 of IGST Act 2017 should be fulfilled, which are given below:- i. The supplier of service is located in India; ii. The recipient of service is located outside India; iii. The place of supply of service is outside India; iv. The payment of 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; 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: In the instant case, the conditions specified in 1, ii, iv, and v are satisfied, whereas in respect of condition iii, which requires place of supply of service to be outside India, it is seen from the submissions of the applicant that M/s. New Shipping Kaisha Ltd., Japan manages vessels which are carrying the country flag of Panama (7 vessels) and the British Cayman Islands (3 ships) are foreign going vessels, and on a world-wide route. During their voy....
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....t services provided in relation to foreign vessels calling at the dock of other Countries outside India 2. What if, the foreign vessels are calling at the port in India? 7.2 The admissibility of the above questions before this authority is prima-facie discussed. The applicant has sought clarification as to whether the services provided by them to the recipient, NSKJ amounts to 'Export of Service'. 'Export of Service' is defined under Section 2(6) of IGST Act, which is as below:- 'Export of Services' means the supply of any service when,- (i) the supplier of service is located in India; (ii) the recipient of the service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has 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 whi....
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.... sub section (2) of Sec. 97 is in wide terms and the Parliament has clearly mandated that the latter issue of determination of liability to pay tax on any goods or services or both, should also be matters on which the applicant concerned could seek advance ruling from the Advance Ruling Authority on which the said authority is obliged to render answers thereto. The Parliament has made the said provision envisaging that in transactions in nature, where India is now a growing economy and has to make its substantial performance in economic growth and development not only domestic investments, but even foreign investments would also be heavily required and that host of tax laws has been subsumed into the overarching umbrella of the goods and sales tax regime introduced by the Parliament and the Parliament would have certainly 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 Se....
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....hich are carrying the country flag of Panama (7 vessels) and the British Cayman Islands (3 ships) and the applicant extends the support services to NSKJ in managing these vessels as per their contract with NSKJ, either by themselves or through various outsourced vendors, whether in or outside India. NSKI charges a fixed management fee of USD 7200/- per month per vessel for providing these support services to NSKJ. Further, in respect of some services provided by vendors to NSKJ, the applicant acts as a pass through for payment to these vendors as and when received from NSKJ. 8.2 On the scope of supporting services, it is stated that the nature of services extended are as follows: Sl.No Nature of Service Description 1 Administration Service Identification of suitable vendors, vendor finalisation, collation of quotation from various vendors, short listing of vendors, facilitating payment to vendors etc. 2 Human Resources Appointment of appropriate staff on Board the vessel, payroll management, recruitment, termination and other services covering Human Resource Management 3 Technical operational services Virtual Engineering Consultancy, Marine En....
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.... which do not require the physical presence of the vessel. Further, it is seen that the applicant acts as 'pass through', i.e., identifies vendors, facilitates entering into agreements with such vendors, attend to payments for the services of these vendors to NSKJ, etc. The applicant is paid a consolidated Management Fees' as service charge for the above bouquet of supporting services extended by them as per their agreement. It is pertinent to note from the submissions that the applicant for the period the vessel stays in the Indian territorial waters, has calculated the pro-rata management fees and have raised GST for that portion of the Management fees as can be seen in the Tax Invoice No. 031/21-22 dated 02.01.2022. In the above factual position, the taxability of the supply provided when the foreign vessels calls at dock of (i) countries outside India; and (ii) at the port of India are examined. 9.1 The taxability of the supply can be arrived at depending on whether the supply amounts to export of services. 'Export of Service' is defined under Section 2(6) of the IGST Act, 2017 as follows:- (6) "export of services" means the supply of any service....
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....corporated under the laws of India and the service recipient group company, NSKJ is incorporated under the laws of Japan and therefore are separate persons and would not be considered as "merely establishments of distinct persons" and therefore condition (v) above is satisfied. 9.3 The next condition to be seen is the 'Place of Supply of Services', which are governed by Section 13 of IGST Act, 2017. The applicant in their submissions has stated that Section 13(3)(a) is relevant for the present submissions. It is the contention of the applicant that the above section covers those services which are directly provided or applied on the goods like repair, reconditioning etc which temporarily come into physical control or possession of the service provider whereas they are not directly doing or performing any work on the vessels but are providing a bouquet of services of varied nature in order to provide support to such vessels and are being performed without having actual possession and hence, are not specifically covered under Section 13(3)(a). They have further contended that their case is not covered by any other sub-sections of Section 13(3) and therefore in terms of the....
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....he taxable territory where any support services requiring the physical availability of the vessel under management is supplied, then the 'Place of Supply" is the location in the taxable territory in respect of that voyage of the vessel. 9.5 It is seen from the records that during the period of December 2021-January 2022 a particular vessel named "MT ORIENTAL TULIP" was engaged in a voyage. On 28th December 2021 the vessel called the port of Kandla, Gujarat, India for loading operations the vessel had departed on 2nd January 2022 leaving the territory of India for the rest of the month of January. The applicant based on the extract of report by Navtracker software which maintains the voyage route and other information about the vessel, has arrived at the taxable management fee of MT ORIENTAL TULIP for the month of January as follows: Particulars Amount (in $) Total Management fee of the vessel for the month of January 2022 =$7800.00 Value of Supply which is considered as Export of services since the POS is Overseas (03.01.2022 to 31.01.2022) =$7800*28/30@=$7280.00 Value of Supply which is considered as Taxable since the POS is Gujarat (01.01.2022 to 02.01....