9911796707
TMI Blog2018 (7) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... to foreign ship owners distinctively as supply of consultancy service and support service with separate and demarcated fees for their consultancy service and for support service: a. Whether consultancy service will qualify as business consultancy service in terms of the scheme of classification of services [Annexure to Notification 11/ 2017 - Central Tax (Rate), dated 28th June, 2017? b. Whether the place of supply of such consultancy service will be the 'location of recipient of service' in terms of Section 13(2)(a) of the IGST Act? c. Whether support service qualifies as "intermediary service" in terms of Section 2(13) of the IGST Act? And, if ruled that the support service qualifies as an intermediary service, the place of supply of support service as intermediary service will be the 'location of supplier of service' in terms of Section 13(8)(b) of the IGST Act? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis viii. Techno commercial assessment of vehicle type utilization opportunities, infrastructure development in various regions, geographical impact on global trade in bulk commodities arising from weather, piracy, war, conflict, any other causes which have prospects to impact trade 4. Fees for the abovementioned services is fixed pre-hand, and typically is a percentage of the gross revenue earned and received by the foreign/ Indian ship owner as the case may be. A sample Consultancy Agreement dated 01 March, 2017 entered between the Applicant and foreign ship owner Singapore Shipping International Pte. Ltd. ("the Agreement") is attached as Enclosure 1. The tax position, as applicable under the erstwhile (pre-GST) regime must be appreciated and understood in the context of these facts and commercial circumstances to enable a considered conclusion under GST regime and law. Tax treatment prior to GST 5. The Applicant had obtained Service Tax registration as per the erstwhile indirect tax regime in the State of Maharashtra. MCS service provided by the Applicant to foreign ship owners and Indian ship owners qualifies as Business Auxiliary service ("BAS") in terms of Chapter V of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CGST Act defines the term 'mixed supply' to mean "two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply". 10. In terms of Section 2(13) of the Integrated Goods and Services Tax Act, 2017 ("IGST Act") defined 'intermediary' to mean "a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account" 11. In terms of Section 2(6) of the IGST Act, export of services means "the supply of any service when. (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 for such service has been received by the supplier of 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 Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant has appointed research analysts on the payroll to undertake market research, track, collate, analyse and monitor port development and logistics data to update future trends to ship owners and also customise this information as per the customer's needs e.g. the type of vessel, cargo carrying capacity, free space available on the board of the vessels. 2. MCS supplied by the Applicant also includes support service provided to the foreign ship owners which largely consists of optimising global trade and revenue therein for the foreign ship owner. For this, the Applicant relies on the database of information maintained by the Applicant. Further, the support service supplied by the Applicant includes monitoring voyage execution for the ship owners for smooth and efficient operations to optimize performance of their ships, examines lay time calculations, and arranges for reconciliation of accounts with the objective of eventual settlement with the charterers. The support services provided by the Applicant are provided to the foreign ship owner and are not meant to facilitate two parties. 3. The Applicant's engagement with the foreign ship owners is not limited to finding pot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected at the foreign ship owner. 7. The services supplied by the Applicant are described in para 3 of Annexure I and may be refereed to understand that the entire gamut of services supplied by the Applicant. Each service listed therein may be provided by the Applicant in isolation and there is no requirement to avail all the services supplied by the Applicant and it is the ship owner's prerogative to avail all or some of the services offered by the Applicant. It is on the request of the foreign ship owners that the services arc supplied in a cohesive manner, as a single offering. Typically, the Applicant is equipped to supply consultancy service and support service distinctly and occasionally does provides the services separately. However, it is practical for the foreign ship owner to avail both services offered by the Applicant as a bundle to increase effectiveness and for cost economies. Provision of consultancy service by the Applicant helps the foreign ship owner to zero in on a suitable charterer, which in turn leads to provision of service like tracking of voyage and assistance in billing by the Applicant. It is only on the request of the foreign ship owner that the two ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tern and disseminate the information to foreign ship owners. MCS constitutes consultancy service provided to foreign ship owners as a specialist in the freight market and support service provided to the mtomonitor voyage execution, examine lay time calculations, etc. These services are provided in conjunction and as a bundle by the Applicant which in turn augments the capacity of foreign ship owners to serve clients globally. Supply of MCS is not a mixed supply 12. When two or more individual services are supplied in conjunction with each other for a single price and where such supply does not qualify as a composite supply, such supply is classified as a mixed supply. From the discussion in the foregoing para of this application, it is evident that consultancy service and support service supplied by the Applicant is naturally bundled and are supplied in conjunction in the ordinary course of business. Consequently, given that Applicant's service qualifies as a composite supply of service, the service does not qualify as a mixed supply in terms of CGST Act. Consultancy service is the principal supply in the composite supply 13. The Applicant is providing composite service compris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant to the foreign ship owner is seen as a principal supply, support service cannot be an intermediary service and therefore MCS in entirety cannot be an intermediary service. 17. Supply of support service as a part of the MCS by the Applicant is not an intermediary service in terms of Section 2(13) of the IGST Act, extracted below: Section 2(13) "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account;" 18. When the Applicant is providing support service under MCS, one may perceive support service as an intermediary service because (a) the applicant is engaged in identifying and then suggesting a potential charterer for the foreign ship owners; and (b) Revenue from MCS service supplied by the Applicant is earned upon successful completion of voyage. Resultantly, it may be argued that essence of the supply of MCS is to arrange and facilitate supply of service between the charterer and foreign ship owner; this is because If supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the charterer. The role ends at the time of introduction of two parties (i.e. foreign ship owner and the charterer) and resumes once an agreement is signed between them, to ensure smooth voyage and settlement of payment. The supply of service by the Applicant is on its own account and directly to the foreign ship owner. Applicant has neither the wherewithal, nor the intent to deal with the charterer. 22. The contract between the foreign ship owner (located outside India) and the charterer (located outside India) is negotiated by electronic means and executed outside India. The Applicant is involved by the foreign ship owner only at the stage of execution of the services (contractually agreed between the foreign ship owner and the charterer) in order to support the foreign ship owner in smooth provision of its service. 23. The essential elements of a supply to qualify as an intermediary service in terms of the definition of 'intermediary' in the IGST Act and the clarification provided in the Service Tax Education Guide', and their applicability on the facts of the Applicant is summarized in the table below: From the Definition in IGST Act From the Service Tax Education Guid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's service as an intermediary service. True nature of an agreement is to be determined, to understand the underlying transaction Hindustan Shipyard Ltd vs. State of Andhra Pradesh /2000/ 119 STC 533. 24. The support service provided by the Applicant does not meet the criterion discussed above. These criteria must be satisfied to classify a service as an intermediary service, in absence of which the support service provided by the Applicant to the foreign ship owner will not qualify as an intermediary service. By reference to the scheme of the GST law, the supply of service by the Applicant would be MCS constituted of consultancy service and support service (and not intermediary service), whereby consultancy service is the principal supply. In absence of consultancy service, the foreign ship owners do not engage with the Applicant for provision of support service to the ship owners even though it may be opted as separate service offering by the Applicant. 25. It needs to be appreciated that prior to insertion of the concept of intermediary, the Applicant was treating the MCS as BAS and this position was adopted by the Applicant even after introduction of the concept of intermediar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g conditions are satisfied: (i) Provision of such service must be to a recipient located outside India; and (ii) Payment for such service is received by the service provider inconvertible foreign exchange If the recipient of taxable service has any commercial establishment or any office relating thereto in India, the taxable service shall be treated as export of services only if the order for provision of such service is made by the recipient of such service from any of his commercial establishment or office located outside India. 29. The Applicant was providing MCS to a foreign ship owner located outside India and the payment for provision of service was received by the Applicant in convertible foreign exchange. Therefore, MCS provided by the Applicant to foreign ship owner qualified as export of service in terms of the Export Rules and no service tax was applicable on this transaction between the Applicant and the foreign ship owner. Where MCS was provided by the Applicant to the Indian ship owner, the Applicant collected service tax on the transaction and deposited it in the Government treasury. 30. From 01st July 2012 up to 30th June, 2017 (negative list regime), with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extant GST law is in line with the position of the Applicant under the erstwhile law. This has been disclosed by the Applicant and accepted by the tax authorities in the service tax returns filed by the Applicant up to June 30, 2017. II. Separate invoicing for consultancy service and support service 34. Assuming that support service provided by the Applicant is construed as supply of intermediary service, supply of entire MCS by the Applicant should not be treated as intermediary service. 35. MCS provided by the Applicant comprises of consultancy service and support service and the Applicant is able to separately allocate value for each service supplied under MCS, raise separate invoice and account for each service separately. If support service provided by the Applicant is construed as intermediary service, the entire revenue from MCS should not be offered to GST as intermediary service. If consultancy service is provided separately by the Applicant to foreign ship owner and a separate invoice is raised for this supply of service (split billing), we assume that the Applicant will be allowed to independently determine the GST incidence on consultancy service provided to foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the composite supplies of MCS by the Applicant to foreign ship owners." Submission dt.02.04.2018 The Applicant makes the following submissions, which are being made without prejudice to, and is to be read along with the submissions made in the ARA, and at with submissions made during the hearings. FACTS AND BACKGROUND 1. The Applicant is engaged in the supply of comprehensive Marine Consultancy Service ("MCS",) consisting of two elements i.e., Consultancy Service and Support Service. This AAR concerns only supplies made to overseas clients and is accordingly Limited and worded. MCS service of the Applicant is provided to the Foreign Ship Owners ("FSO") who wish to have and therefore seek out potential employment (charterers) for their vessels. Entire engagement between the Applicant and FSO is on principal to principal ("P2P") basis and has the essential nature of consultancy or market intelligence/ information. Reference in this regard may be made to a sample Consultancy Agreement dated 01 March, 20 17 entered between the Applicant and foreign ship owner Singapore Shipping international Pte. Ltd. ("the Agreement") is attached as Enclosure Ito Annexure I of the ARA. 2. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arranging for reconciliation of accounts to crystalize receivables of FSO. Occasionally, support may involve postal or ministerial acts of transmitting messages between FSO and charterer. 3.3. Both Consultancy service and Support service are together provided, and Applicant does not offer these independently or separately and so has a comprehensive agreement and fee. 4. Manner of supply of MCS 4.1. While supplying the abovementioned services, Applicant and FSO converse, appreciate data, evolve best consumer strategy for employment of vessel. Typically, the Applicant is continuously studying/ analyzing the freight market and trade development across the world, On the basis of this analysis, the Applicant reaches out to FSO who have idle vessels and are looking out for charterers to provide such FSO with information which helps FSO to position their vessel and acquire charterers seeking to transport goods- The Applicant is only disseminating information which is useful for FSO to find potential charterers and this is the end of Consultancy service. FSS is not acting for or representing or an agent for or employed by or assists or advises the charterer in any form or manner. 4.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the FSO and the Charterer. This arrangement is premised on concept of value added service i. E. 'no contract' will result in 'no fee ' . From another perspective, contingent fee is evolving globally as a payment structure/ terms like for consultancy and cost reduction assignments and factors in risk for Applicant (Service Provider).Such payment timing, i.e. upon full completion of agreed activities is the basic law of commission. ISSUES TO BE CONTEMPLATED UNDER ADVANCE RULING APPLICATION 7. Given the above background and in context of question posed, the following notable features of the contractual arrangement of the Applicant with the FSO are: i. The MCS supplied by FSS is a "composite supply" (similar to bundled service in the erstwhile regime) with consultancy service as the principal supply [Section 2(30) of the Central Goods and Services Act, 2017 ("CGST Act")] and not a "mixed supply"? ii. MCS deserves to be classified as per SAC 9967 i.e. 'support services in transportation, other than GTA' and not as (SAC 9983) other professional, technical and business services (excluding advertisement service), which is a residuary head, in terms of the following entry of Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided at the time of initiation of service by the Applicant to the FSO and Support service is provided at the end of supply at the time of completion of employment of the FSO by the charterer. No FSO separately seeks provision of Support service, MCS has evolved over a period of time and Support service is typically provided as value addition to the FSO. Consultancy service in the ordinary course of business is provided in combination with Support service, this is indicated by the industry practice. 11 . One of the service provided by the Applicant amidst the gamut of service is the principal supply or the main/ primary supply. In case of the Applicant, the principal or the primary supply by the Applicant is the Consultancy service which helps the FSO to initiate business by finding business and the Support service is ancillary service which is provided at the time of closure of service when the Applicant is called upon to calculate lay time, etc. and help FSO to close its service provided to the charterer. Both Consultancy service and Support service is provided to and for FSO on P2P basis and the Applicant has no wherewithal with the Charterer or paid by the Charterer- 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodity market, etc. helps FSO to reach out to potential charterers which is the main objective of FSO's business Once FSO enters into a contract with the charterers, FSS is called objective upon to provide Support service in relation to the voyage. Therefore, without Consultancy service FSO will not be able to efficiently contract with potential charterers and provide services and Applicant may not be called upon to provided Support service. * The service recipient pay single price regardless under of the services within the package, Applicant is obliged to provide all services under the Agreement including the Consultancy service and Support service. These services are provided by Applicant to and for paid FSO on need basis. MCS is never provided to or for Charterer and fee for MCS is only paid by the FSO. This is another important indicator of the perception in Service recipient's minds that fee is payable for a consolidated offering. * Elements are normally advertised as a package. Applicant in all cases enters into an agreement with FSO to provide MCS consisting of Consultancy service and Support service. Applicant is not a conduit between the FSO and the Charterer. Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by State Tax officer ('the officer') before the Hon'ble Authority on March 13, 2018 ('Revenue Submission'). In this Revenue Submission, the Officer has submitted that MCS is a composite supply of service in terms of Section 2(30) of the CGST Act. 17. Contrary to the above contentions, a "mixed supply" is the supply of two or more services made in conjunction with each other by a taxable person for single price where such supply does not constitute a composite supply in terms of Section 2(30) of the CGST Act. As MCS provided by FSS qualifies as composite supply given the discussion and analysis above, this service would not qualify as "mixed supply" in terms of Section 2(74) of the CGST Act. II. MCS provided to FSO will qualify as an export of service in terms of Section 2(6) of the IGST Act 18. Export of service is defined under Section 2(6) of the IGST Act as following: "2(6) "export of services" means the supply of any service when,-- (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 for such service has been received by the supplier of service i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . MCS is provided to FSS is in-turn utilized by the FSO to find a charterer looking for transportation of Goods and this also involves lay time calculation, arranging reconciliation of account and voyage monitoring. Both Consultancy service and Support service are intellectual services provided by Applicant from its office with its own resources thereat, who never have to or have in the past to deal with vessel of FSO or cargo of Charterer. In no case, the vessel or the cargo transported by the FSO is physically made available by the recipient of service (i.e. FSO) to the provider of service (i.e. FSS), therefore, Section 13(3)(a) of IGST Act would not at all apply to MCS. iii. Since there is no definitive guidance, reference in this regard may be made to Taxation of Services: An Education Guide (June 20, 2012) which is the predecessor rule in Service tax (negative list), the relevant paragraph of which is extracted below: "The essential characteristic of a service to be covered under this rule is that the goods temporarily come into the physical possession or control of the service provider, and without this happening, the service cannot be rendered. Thus, the service involves m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled, who arranges or facilitates the supply of woods or services or both, or securities, between two sir more persons. but does not include a person who supplies such goods or services or both or securities on his own account." ii. When the Applicant is providing MCS, it is a composite supply of service wherein Consultancy service is the principal supply. MCS is supplied on P2P basis to and for the FSO and would not qualify as' intermediary service' in terms of Section 2(13) of the IGST Act. Given this, place of supply of MCS will not be determined in terms of Section 13(8) (b) of the IGST Act which provides the 'location of supplier of service' as the place of supply. Resultantly, the place of supply of MCS (comprising of support service and intermediary service) will not be the location of the Applicant in India. iii. In arguendo, if the Applicant is characterized as a supplier of intermediary service, it must not be lost sight of that the service provided by FSS in this case would be in relation to a employment of a vessel {i.e. service provided) by the FSO located outside India - so the destination of Applicant's service is outside India, to the Charterer located outside Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transport' (entry 745). Furthermore, the Schedule prescribed under the Served for India Scheme ('SFIS') of Foreign Trade Policy has embraced the classification by the WTO. This Schedule of SEIS scheme also classifies MCS under the category of Maritime Transport Services [supporting services for maritime transport (745)]. Thus, it can be safely concluded that MCS provided by Applicant to FSO would be classified as support services in transport, other than GTA. 25. In the invoice raised by Applicant on FSO which categorizes the supply of service by FSS to FSO as MCS, a copy of which invoice is enclosed as Annexure 1 supports the commercial understanding. Consequently, in the financials of FSS for the year 2017-18 in the Profit and Loss accounts income from MCS has been reflected as revenue. 26. MCS will not be classified under Heading 9983(ii) at Serial No. 21 as "other professional, technical and business services other than (i) above". Relevant entry under Heading 9983 is SAC 998399 at Serial No. 364 of the Annexure {i.e. "other professional, technical and business services nowhere else classified"). Services classified under this head are leviable to GST at the same rate of 18% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators of which are listed below:- * The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business. * The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. * Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are - a. There is a single price or the customer pays the Same amount, no matter how much of the package they actually receive or use b. The elements are normally advertised as a package. c. The different ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally agreed and requested that his queries with respect to place of supply may not be considered for decision by the Authority. The final hearing was held on dt.13.03.2018. Sh. Ranjeet Mahtani and Sh. Abhinay Kapoor, both Advocates, appeared and made oral and written contentions as per detailed submission made in their application and documents submitted at the time of hearings. Ms. R. S. Iyer, jurisdictional State Tax Officer appeared on both the hearings and has made a written submission. 05. OBSERVATIONS We have gone through the facts of the case. Sub-section (2) of section 97 of the GST Act says that the question on which the advance ruling can be sought 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e terms and conditions of this Agreement, render such Services during the term of this Agreement. Such services shall be limited to the area of expertise described in Exhibit A, as amended in writing form time to time. Consultant shall render services hereunder at such times and places as shall be mutually agreed by 'The Company' and Consultant. (b) It is understood that the purpose of the Consulting is to provide periodic review and advice relevant to Shipping and Maritime matters related to the MV AM OCEAN PRIDE/MARUBENI CEMENT CHARATER PARTY CONTRACT DATED 3RD MARCH,2017. To that end. 'The Company' shall provide Consultant, in advance of meetings, with accurate, unbiased and sufficient information for him to review the subject matter thereof, and shall promptly provide further information that Consultant reasonably deems relevant to forming any pertinent conclusions relevant to the matter for discussion. It is expressly understood that Consultant has fiduciary obligation to 'The Company' based on contractual terms of this Agreement; that Consultant's role is to provide independent advice uninfluenced by commercial concerns; and that service as a Consultant does not require him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o advise and assist `The Company' as required in accordance with their Technical & Professional ability with respect to all aspects in the performance of such duties the Consultant shall comply with all reasonable requests and directions of `The Company' or its customer or nominee including subsidiaries & affiliate entities. Complying with all local or internal policies and regulations operated by or affecting 'The Company' or its customer or nominee as the case may be provided the Consultant has been appraised of them. 5. Independent contractor stratus 'The Company' shall request Consultant services on an as-needed basis. There is no guarantee that any or all of the services described in this Agreement will be assigned during the term of this Agreement. Further, the Consultant will provide these services on a non-exclusive basis. 'The Company', at its option, may elect to have any of the services set forth herein performed by other consultants or 'The Company' staff. The parties agree that this Agreement creates an independent contractor relationship, not an employment relationship. The parties acknowledge that neither party has, or shall be deemed to have, the authority to bind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Company' Confidential information for any purposes other than consultation with 'The Company'. (c) Consultant agrees that their obligations under the Agreement are of a unique character that gives 'The Company' particular value, Consultant's breach of any of such obligations will result in professional misconduct towards 'The Company'. 9. Term (a) This Agreement shall remain in effect for a term of 1 year commencing on the date first written above, unless sooner terminated as hereinafter provided, or unless extended by agreement of the parties. (b) This Agreement may be terminated by either party, with or without cause, upon thirty (30) days prior written notice to the other; provided that the Consultant shall, in accordance with the terms and conditions hereof, nevertheless wind up in an orderly fashion assignments for 'The Company' which Consultant began prior to the date of notice of termination hereunder. (c) Upon termination of this Agreement for any reason, Consultant shall be entitled to receive such compensation and reimbursement, if any, accrued under the terms of this Agreement, but unpaid, as of the date Consultant ceases work under this Agreement. In addition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminary evaluation of cargo volume, trade patterns, trend in commodity movement, port congestion, Global as well as Regional economic development and analysis 9) Techno-Commercial assessment of vehicle type utilization opportunities, infrastructure development in various regions, Geographical impact on global trade in bulk commodities arising from weather, piracy, war, conflict or any other causes which have prospects to impact trade. 10) Consultancy Fee is deemed earned upon actual voyage being performed and reconciliation of voyage specific amount and in accordance with clause 3 of the Consultancy Agreement. With the above agreement and the arguments placed, we see the issue thus - It is the contention that the applicant is offering Consultancy as well as Support services which constitute a composite supply as defined under section 2(30) of the GST Act as under : (30) "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing performed and reconciliation of voyage specific amount and in accordance with clause 3 of the Consultancy Agreement. In the submission, the applicant has stated thus - * MCS (Marine Consultancy Service) provided by the Applicant constitutes of consultancy service and support service. * Consultancy service provided by the Applicant includes analysing commodity, shipping and freight market, finding potential charterers for the foreign ship owners. * MCS supplied by the Applicant also includes support service provided to the foreign ship owners which largely consists of optimising global trade and revenue therein for the foreign ship owner. * The support services provided by the Applicant are provided to the foreign ship owner and are not meant to facilitate two parties In the further submission, we find that the applicant has identified the following services as Consultancy and Support Services, respectively - Consultancy Services 1) As Specialists in freight market movement. the consultant will analyse commodity, shipping and freight markets track movement of ships and cargoes and disseminate such information to 'The company'. 2) Track, collate, analyze and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all of the services or may not be called to do any of the services. The flyer on 'composite supply and mixed supply' as available on the website of the Central Board of Indirect Taxes and Customs says that - Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators. In the present case, the fact that the foreign ship-owner has categorically made it clear in the agreement that some of the services may also be availed from other Consultants should leave no doubt that the services are not needed to have been bundled together. It becomes clear from the agreement that the foreign ship-owner doesn't desire to avail all of the services from the applicant as he is at liberty to get the same performed by other consultants or his staff. Even the applicant admits that- * each service may be provided by the applicant in isolation * applicant is equipped to supply consultancy service and support service distinctly and occasionally does provides the services separately. Thus, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement, we find no difficulty in concluding that the provision of services under the impugned agreement would not be a composite supply under the GST Act. 8. The arguments in favour of the impugned supply being a composite supply fail to make out a case. Question 2(a) In the alternate, where services are provided to foreign ship owners distinctively as supply of consultancy service and support service with separate and demarcated fees for their consultancy service and for support service: (a) Whether consultancy service will qualify as business consultancy service in terms of the scheme of classification of services (Annexure to Notification 11/ 2017 Central Tax (Rate), dated 28th June, 2017? To answer the question, we refer to the Annexure about Scheme of Classification of Services as appended to the Notification no.11/2017 - Central / State Tax (Rate) [as amended from time to time] as under- S. No. Chapter, Section, Heading, Group Service Code (Tariff) Service Description 297 Group 99831 Management consulting and management services; information technology services 299 998312 Business consulting services including public relations services As ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996751 Port and waterway operation services (excluding cargo handling) such as operation services of ports, docks, light houses, light ships and the like 146 996752 Pilotage and berthing services 147 996753 Vessel salvage and refloating services 148 996759 Other supporting services for water transport nowhere else classified 125 Heading 9967 Supporting services in transport 154 Group 99679 Other supporting transport services 157 996793 Other goods transport services 158 996799 Other supporting transport services nowhere else classified 296 Heading 9983 Other professional, technical and business services 345 Group 99837 Market research and public opinion polling services 346 998371 Market research services 296 Heading 9983 Other professional, technical and business services 356 Group 99839 Other professional, technical and business services 359 998393 Scientific and technical consulting services 364 998399 Oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity Trade pattern development 4. Identify and provide information on Port Costs, Bunker (fuel) trend, Cost Estimation & Analysis. 5. Monitor Voyage Execution for smooth and efficient operations, 6. so as to optimize::e performance for 'The company'. 7. Examine lay time calculations and arrange for accounts reconciliation for objectives of eventual settlement. 8. Preliminary evaluation of cargo volume, trade patterns, trend in commodity movement, port congestion, Global as well as Regional economic development and analysis 9. Techno-Commercial assessment of vehicle type utilization opportunities infrastructure development in various regions, Geographical impact on global trade in bulk commodities arising from weather, piracy, war, conflict or any other causes which have prospects to impact trade. 10. Consultancy Fee is deemed earned upon actual voyage being performed and reconciliation of voyage specific amount and in accordance with clause 3 of the Consultancy Agreement. We find that in the submissions made before us the applicant has contended that they are providing services only to the ship owners and not to the ship charterers. However on going to the copies of the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, it is clear that the support services being provided by them would be 'intermediary services' and the applicant would be covered in the definition of an intermediary in terms of Section 2(13) of the IGST Act, 2017. Having seen thus, we would have to answer the question in the affirmative. 6. In view of the deliberations as held hereinabove, we pass the order as follows : ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-18/2017-18/B- 26 Mumbai, dt.18/04/2018 For reasons as discussed in the body of the order, the questions are answered thus - Q.1 Whether Marine Consultancy Service ("MCS") provided to foreign ship owners constitutes "composite supply" with the principal supply of consultancy service? A.1 The question is answered in the negative. Q.2 In the alternate, where services are provided to foreign ship owners distinctively as supply of consultancy service and support service with separate and demarcated fees for their consultancy service and for support service: Q.2a Whether consultancy service will qualify as business consultancy service in terms of the scheme of clas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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