TMI Blog2022 (5) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under the Heading 9985, it is found that the services of the applicant, may at best fit under 'SAC 998599- Other support services nowhere else classified' - the services proposed as per the write-up and the pictorial representation above, is Berth hire services for docking the vessels; Lighthouse dues; customs/documentation for the vessel to enter/exit the territorial waters/port; husbandry services; Survey/Launch hire services; Requirement of Crew/fuel for the vessels. Thus, it is seen that the applicant extends vessel related services, supporting the shipper to facilitate the entry/exit of the vessel in the Indian Ports, i.e., the services are more in the nature of support services for transport of vessels' and more aptly will be classifiable under SAC 9967. Thus, the services are support services classifiable under SAC 9967 and the applicable rate is as per SI.No. 1 l(ii) of Notification No. 11 /2017-C.T.(Rate) dated 28.06.2017 as amended. Export of services or not - HELD THAT:- It is seen that the services extended are to enable the vessel reach the port; leave the port and undertaking repairs/ requirements of the vessel 8s crew when such vessel is in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. Translog Direct Pvt. Ltd., with the address for communication as 13/6, Judge Jumbulingam Street, Mylapore, Chennai- 600004 (hereinafter 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 ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er transport. 2.3 They have stated they are concerned with this leg of the transaction only i.e. concerned with vessel operations when entering/exiting India. It does not deal with further transportation to the end customers, or the proposed services are not in any way related to liaising with the end customers. There is no relationship of the Applicant with the end customers of the charterers/shipping lines. The nature of support services to such charterers will be to provide services in an aligned, efficient and coordinated manner so that the overseas charterers can utilize port, documentation and related services easily as well as take care of their day-to-day vessel functions. 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 Terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Finance Act 1994 (erstwhile service tax regime) under Section 65(104C) and Section 65B(49) and stated that accordingly, in consonance with the present factual matrix and the services specified therein, the services to be rendered are in the nature of supporting the commerce and business of the overseas charterers/ shipping lines while the ship/vessel is in India. The services proposed to be rendered assist in the administration and manage the logistics/operations of the ships/vessels while entering/leaving the ports of India. Further, they will only help in supporting and assisting in the logistical operations of 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 nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vessel into/outside India. It is their business to provide such services wherein their 'value add' is to streamline and deliver real logistics and support value to the charterers/shipping. It cannot be equated to mean anything differently. Accordingly, there is no agreement with ship owners to market their vessels for chartering and then subsequently provide logistics and administrative support to such charterers who hire the vessels. This could fall under the meaning of 'facilitation of supply' between the ship owners 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 transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed June 28, 2017. More specifically, under Serial No. 23 (iii) of the above notification under heading SAC 9985 which deals with Support services other than (i) and (ii) above . II. Such support services should be determined as an export of service based on the present facts and circumstances The definition of exports under Section 2(6) of IGST Act, 2017 is broken down into five parts and compared in the table below: Essentials u/s 2(6) IGST Act, 2017 ELIGIBILITY 1. The 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SAC 9985 which deals with Support services other than (i) and (ii) above . 3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was fixed to be held on 09.11.2021. The applicant vide their e-mail dated 03rd November 2021 requested for adjournment. The request was accepted and the case was heard virtually on 30.11.2021. Shri. K. Sivarajan, Partner PWC, the Authorised representative (AR) appeared for the hearing virtually 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 'support services' in line with the classification under SAC Code 9985 so that the shipping lines/charterers are not worried about the paperwork or other routine customary formalities involved for the ships coming into India. They provide a one-stop solution to manage vessel related activities in India, along with their expertise, availability of resources, increase in efficiency etc. The service recipients (overseas shipping lines/charterers) may not have full knowledge of the process involved including the governing laws (as it differs from country 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are an independent contractor providing services on their own account (on principal-to-principal basis) to their customers i.e., the overseas charterers/shipping lines (refer clause 22 of Section 6 of the draft SLA) Even in cases where third parties/service providers are engaged, they are responsible for their activities. The service arrangements with the third-party contractors will be dehors the contractual arrangement between them and their customers (i.e., overseas shipping 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 serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent, freight forwarder, port authorities etc. in respect of the vessels' entry, berthing and exit out of the Indian Port. As a part of its business solution, they will be acting as a single service provider providing all the services that may be required by the shipping lines with regard to arrival and departure of the Vessel from the Indian ports and the services may commence pre-arrival of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of the contract/agreement. In this regard, the proposed agreement has the following clauses:- a. Independent contractor clause (Clause 23 of representative agreement) - There is no principal-agency relationship between the Applicant and its customers. The Applicant is an independent contractor where it is entering into a contract 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2 The State Jurisdictional Authority, Thiruvallikeni Assessment Circle, vide letter RC. No. 101/2021/A-3, dated: 02.11.2021 has stated that:- The applicant is a newly incorporated company incorporated under the Companies Act 2013 and not 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 Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice 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 been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of two weeks from the date of receipt of a certified copy of this judgment. Thereafter, the Advance Ruling Authority will immediately give notice of 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them, viz:- Handling all registration, approval, advance payments and formalities regarding the arrival and departure of the vessel towards 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. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g such service through electronic commerce operator is not liable for registration under sub-section (t) of section 22 of the Central Goods and Services Tax Act, 2017. 2.5 Provided that credit of input tax charged on goods and services has not been taken [Please refer to Explanation no. (iv)]. (iii) Support services 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 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices 423 998533 General cleaning services 424 998534 Specialised cleaning services for reservoirs and tanks 425 998535 Sterilisation of objects or premises (operating rooms) 426 998536 Furnace and chimney cleaning services 427 998537 Exterior cleaning of buildings of all types 428 998538 Cleaning of transportation equipment 429 998539 Other cleaning services nowhere else classified 430 Group 99854 Packaging services 431 998540 Packaging services of goods for others 432 998541 Parcel packing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the applicant to their clients are end to end requirements of the vessel when such vessel calls on the Indian Port. This being in the nature of supporting the activities of their clients, the applicant states that the services are covered under 'Supporting Services -others'. On going through the various service desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for water transport nowhere else classified. The so called 'end-to end' 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in sub-sections (3) to (13) shall be the location of the recipient of services. The applicant contends that the services proposed to be rendered are in the nature of assisting in the administration and managing the logistics/operation 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; att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion where the services are actually performed, which is the taxable territory. 9.5 Having decided that the 'Place of supply' is the taxable territory wherein the vessels call in, the condition of the place of supply being outside India is not satisfied in the case at hand. Therefore, the proposed supply is not an 'Export of Service'. Accordingly, the proposed supply classifiable under SAC 9967 is taxable to GST @ 18% under Sl.No. 11(ii) of the Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended read with SI.No. 11(ii) of Notification No.II(2)/CTR/532(d-14)/2017 in G.O. Ms.No.72, CT R(B1), dt.29-6-2017. In view of the above findings, the claim of the applicant that they are not 'Intermediary' under GST and therefore, their location, i.e., the taxable territory is not the Place of Supply as per Section 13(8) of IGST Act 2017 is not examined as considered Void. 10. In view of the above, we rule as under: RULING Question No. 1. The Applicant's business/ proposed transaction is liable to be classified under SAC 9967 and is liable to CGST @ 9% as per SI.No. 11(ii) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 to SGST @9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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