TMI Blog2022 (4) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... e and control all aspects of the execution of the Project by the Execution Partners. The applicant has been contracted to supply PMC services to suit the requirements of VL and from the oral and written submissions made by the applicant, it is found that there is no supply of goods involved in the subject case and therefore the impugned supply is a supply of services under the GST Laws. From a reading of the Circular No. 114/33/2019-GST and the relevant Explanatory Notes to service codes 998341 and 998343 of the Scheme of Classification of Services, it is clear that the impugned services are not covered by the said Explanatory Notes since the service code 998341 is restricted to Geological and geophysical consulting Services and the service code 998343 is restricted to Mineral exploration and evaluation Services and the impugned services being provided by the Applicant cannot be considered as being connected to either Geological and geophysical consulting services or Mineral exploration and evaluation services. In the subject case even though the impugned services consist of professional, technical and business services, the same are not covered under SAC 9983 (Sr. No. 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at 63 - 64, 6th Floor, Kolpataru Square, Kondivita Lane, Off Andheri - Kuria Road, Andheri (East), Mumbai 400059 is engaged in the business of providing Technical Consultancy Services in Marine, Nuclear and Oil Gas sector. 2.2 Vedanta Limited (Division: Cairn Oil Gas), (hereinafter referred as Cairn, Customer ) was awarded exploration licenses for OLP blocks as part of the Government of India s Open Acreage Licensing Policy (OALP) in 2018. The blocks spread across India are a combination of both offshore and onshore with a combined acreage of over 50,000 sq. Kms. 2.3 Cairn identified partners ( Execution Contractors ) to execute the project and the scope of execution would be across the entire spectrum including Seismic services (Acquisition, Processing Interpretation), non-seismic services (FTG, MT etc.), well construction (drilling, completions, fraccing testing), installation of early production facilities wherever applicable and preparation of field development plans (in fields with proven commerciality) and the broad scope of work involved in oil and gas operations by Execution Contractor is in three phases, i.e. Exploration Phase, Appraisal Phase and Fie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stakeholders, provide mitigation strategy alternate plan in case of a delay, Managing the on field team to ensure efficient resource utilization and interactions. 2.7.3 Functional Scope includes provision of personnel with necessary experience and qualifications to execute the scope of work and includes the following:- Drilling services: which includes review and validation of the plan/programs submitted by the Execution Contractor and make recommendation to Cairn, Review and validate Basis of well design (BDWD), Re-entry and Sidetrack feasibility studies, Review Completion basis of design documents, Review and validation of individual well programs, drilling montages, directional plan, drilling fluid program, cementing program, abandonment program, well suspension program etc. Petroleum Engineering Services: Ensure well completions suitability for Testing all the zones, Hydro-fracturing, intervention for well testing, data acquisition and sampling, zonal isolation and well-suspension, Suggest/Review composition and characteristics of completion brine and perforation strategy to ensure connectivity with reservoir. To undertake pre-job, during execution and post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... digits heading then, the corresponding description provided in column 3 has to be looked at. If the description matches with the service being provided, then the service gets classified under that particular entry, attracting the corresponding rate mentioned in column 4 as per the conditions as prescribed in column 5. Further, Code Wise List of Services annexed to Notification No. 11/2017 (supra) ( SAC List of Services ) provides for 5- and 6-digits bifurcation of the heading mentioned in column 2 of the table provided in Notification No. 11/2017 (supra), which are covered by the said heading. All other guidance in the nature of Explanatory Notes to The scheme of classification of services, Circular No. 114/33/2019- GST dated 11.10.2019, etc. is only for the purpose of assistance to classify the services which would be covered by the given entries. In no way the Explanatory Notes or any circular issued by the Department can limit the scope and ambit of the entries provided in Notification No. 11/2017 (supra). Therefore, if a particular service is classifiable under a given entry / serial number in the table provided in Notification No. 11/2017 (supra) read with the annexure providi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loration to Cairn: 2.12 In GST, oil gas sector is outside the ambit. Thus, no credit is available of GST paid on inputs availed by such companies. With an intent to reduce the impact the GST on their procurements, Government has provided/ continued certain benefits even in GST regime. For example, on import, BCD exemption continues and concessional rate of Integrated Goods and Services Tax (IGST) at 5% is applicable on import of goods for oil and gas exploration operations. 2.13 Notification No. 03/2017 - CTR dated 28.06.2017, provides for concessional rate of GST at 5% effective rate) for intro state supply of goods to projects relating to exploration of oil and natural gas. Notification No. 03/2017 - ITR dt 28.06.2017 provided the said concessional rate for inter state supplies. Vide Notification No. 31/2017 - CTR dated 13.10.2017, effective rate of GST ed to 12% for composite supply of works contract and associated services in respect of offshore works contract relating to oil and gas exploration and production in the offshore area beyond 12 nautical miles from the nearest point of the appropriate base line. Further, with the same intention to reduce the cascading of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being rendered by Applicant to Cairn should be covered under Entry 21(ia) of Notification No.11/2017 (supra) which is a more specific entry more when the activities being rendered by the Applicant gets clearly covered under the explanatory notes provided for various sub-headings under SAC 9983. 2.16 The below table captures relevant excerpts from the explanatory notes in one column along with the corresponding scope of work from the contract which gets covered by such explanatory notes. Relevant portion of the Explanatory Notes Relevant portion of the contract 998311 Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management This service code also includes providing advice, guidance and operational assistance concerning business policy and strategy and the overall planning, structuring and control of an organization. More specifically, general management consulting assignments may deal with one or a combination of the following: i. policy formulation; ii. Determination of the organizational structure (de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure that the cluster level activities are not delayed. Scope of work for cluster management includes but not limited to: 4.2.1 Drilling Services The Drilling engineers as part of PMC shall be responsible for collaboration with Integrated Services Execution Contractors to deliver the wells and overall drilling campaigns with zero or minimum environmental impact, and in compliance with all the Statutory, Regulatory, COMPANY standards, policies guidelines and relevant API guidelines and industry best practices. 4.2.2 Petroleum Engineering Services 4.2.3 Surface Engineering Services Scope of work for surface engineering services includes but not limited to: 4.2.4 FDP Validation of FDP concept including various concepts/ plans for processing evacuation, field architecture field layouts, products evacuation methods, sequencing of development (integrated/ phases), provision of artificial lifting methods, etc. Validate results of FEED/Pre-FEED studies Review and validate all three parts of FOP document (except G G services): Part A which shall be the detailed technical assessment report ( T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R: The jurisdictional officer has not made any submissions in the matter. 04. HEARING 4.1 Preliminary e-hearing in the matter was held on 08.06.2021. The applicant was represented by Authorized Representatives Shri. Mihir Deshmukh, Advocate, Shri. Rajendra Apte, and Shri. Kirti Oswal, Partner. Jurisdictional officer Smt. Nilima Dhamanaskar, Superintendent, Division V, Mumbai-East was also present. The Authorized Representatives made oral submissions with respect to admission of their application. 4.2 The application was admitted and called for final e-hearing on 26.11.2021. The Authorized representative of the applicant Shri. Swarup Chingale, CA, Shri. Ruturaj Chingale, CA and Shri. Sunil Bhosale, PCSCL were present. Jurisdictional officer was absent. Applicant was asked to provide details of agreement dates, work order details and dates, dates of starting of work with copies of work order and details of completion of works till today and details regarding tax treatment being adopted by applicant with copies of invoices. 05. DISCUSSIONS AND FINDINGS: 5.1 We have perused the documents on record, and have taken into consideration, both oral and written submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt shall provide personnel with necessary experience and qualifications to execute the scope of work and perform activities which includes : review and validation of the plan/programs submitted by Execution Contractor and make recommendation to VL on all decision points ; Review Completion basis of design documents in coordination with the Petroleum Engineers and validate individual well programs, cementing program, etc. ; Review and monitor daily drilling operations and ensure timely submission all daily deliverables. Review third party rigs/ tangibles/ vessels inspection report, endurance test report, rig equipment inspection reports, equipment testing reports, acceptance and closeout reports, other petroleum engineering services, etc. Details of the scope of work as per the contract are mentioned in the application. 5.6 We find that, as a part of such project management consultancy services, the Applicant is required to manage the Projects right from the detail design to commissioning and is also required to review, monitor, manage and control all aspects of the execution of the Projects. Applicant will perform its activity using its independent and self-sufficient team, on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr.No. Heading Description of Service Rate (per cent) 21 Heading 9983 (Other professional, technical and business services) (i) . 2.5 (ia) Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both. 6 (ii) Other professional, technical and business services other than (i) and (ia) above. 9 5.12 From the scope of work mentioned above, we find that the applicant is providing various kinds of professional and business services to VL. The term business has been defined under Section 2 (17) of the CGST Act, has a very wide connotation and includes:- (a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other Similar activity, whether or not it is for a pecuniary benefit; (b) Any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) Any activity or transaction in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces This service code includes provision of advice, guidance and operational assistance concerning the location of mineral deposits, oil and gas fields and groundwater by studying the properties of the earth and rock formations and structures; provision of advice with regard to exploration and development of mineral, oil and natural gas properties, including pre-feasibility and feasibility studies; project evaluation services; evaluation of geological, geophysical and geochemical anomalies; surface geological mapping or surveying; providing information on subsurface earth formations by different methods such as seismographic, gravimetric, magnetometric methods other subsurface surveying methods This service code does not include - test drilling and boring work, cf. 995432 998343 Mineral exploration and evaluation This service code includes mineral exploration and evaluation information, obtained on own account basis Note: This intellectual property product may be produced with the intent to sell or license the information to others. 3.2 The relevant Explanatory Notes for Heading 9986 are as follows: 998621 Support services to oil and ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme of Classification of Services. The relevant Explanatory Notes are already mentioned in the Circular above and are not reproduced for the sake of brevity. 5.16 From a reading of the Circular and the relevant Explanatory Notes to service codes 998341 and 998343 of the Scheme of Classification of Services, it is clear that the impugned services are not covered by the said Explanatory Notes since the service code 998341 is restricted to Geological and geophysical consulting Services and the service code 998343 is restricted to Mineral exploration and evaluation Services and the impugned services being provided by the Applicant cannot be considered as being connected to either Geological and geophysical consulting services or Mineral exploration and evaluation services. 5.17 In view of the above it is held that the impugned services are not covered under Sr. No. 21 (ia) of Notification 11/2017 - CTR dated 28.06.2017 as amended by Notification No. 20/2019 - CTR dated 30.09.2019 (SAC 9983). 5.18 In the subject case even though the impugned services consist of professional, technical and business services, the same are not covered under SAC 9983 (Sr. No. 21 (ia)), as discuss ..... 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