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TMI Blog2022 (12) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... vices (herein after referred to as "Parent Company"). The parent company sold two equipment (Test benches for aeronautics cases) to their customer in India and the said equipment are currently with Indian Air Force at their operational forward basis. The parent company has subcontracted certain services to the applicant with respect to the test benches. 3. In view of the above, the applicant has sought advance ruling in respect of the following questions:- i. Whether the services provided by the company to its parent company relating to the test benches which are in the name of MRO services, be classified under heading "9987 i(a): Maintenance, Repair or Overhaul services in respect of aircrafts, aircraft engines and other aircraft components or parts"? ii. If the answer to the above is in affirmation, then whether the Place of supply is the "location of the recipient" as per the Notification No. 02/2020-Integrated Tax dated 26th March 2020 which is the location of the Parent Company (Outside India) and that can be construed as exports of services? iii. If the answer to the first question is in negation, then we would like to know the classification of the services provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s Interpretation of Law: 6.1 The applicant contended that the above set of activities are categorized as Maintenance, Repairs and Overhaul (MRO). The place of supply of MRO services shall be the location of recipient of services as per the notification No.02/2020-Integrated Tax dated 26th March 2020. 6.2 The applicant further stated that the section 2(14) of IGST Act lays down the definition of "location of recipient". Accordingly, the clause (b) reads as ".....................where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment" is the current situation in the Company. 6.3 The applicant submits that the parent company is outside India and hence the registration is not obtained. Consequently, the place of supply shall be outside India if the services are covered under clause (b) of the Section 2(14) of the IGST Act and the services shall be treated as Zero-rated supply. PERSONAL HEARING / PROCEEDINGS HELD ON 18-08-2022 7. Sri Nikhil Jain, Chartered Accountant and Duly Authorised Representative appeared for personal hearing proceedings held on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l raise invoice to its parent company as they do not have direct contract with the Indian customer (IAF) and the payment against such invoices shall be received from the parent company in foreign currency as well. 13. In view of the above, the Applicant sought advance ruling in respect of the questions mentioned at para 3 supra which are centered around the classification of their services and the applicability of entry Sl.no. 25 (ia) of the Notification 11/2017 Central Tax (Rate) dtd 26.06.2017, as amended. The applicant claimed that their activities are covered under MRO services and are classifiable under SAC 9987 and is exigible to GST @ 5% in terms of entry No.25 (ia) of Notification No. 11/2017-Central Tax(Rate) dated 26.06.2017, as amended. 14. We proceed to examine the nature of the services of the applicant and their classification. In this regard we invite reference to the agreement entered by the applicant with their parent company. As per the agreement, the Parent Company is a provider of test solutions notably in the field of aircrafts / avionics and they have delivered a test solution on two sites (MOB1 & MOB2) of Indian customers. 15. Article 1 of the agreement de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the problem and initiate a Technical Fact follow-up sheet (Supply [F1]) to inform Dassault Aviation as well as to the parent company for processing. It is pertinent to mention here that that the solution research activity is not the subject of the contract, as it is outside the scope of technician's activity. 17. Further, the technicians on receipt of the solution to the 'Technical Fact', implement the said solution and restart the procedure during which the malfunction appeared. The technicians close the Technical Event' if the problem disappears. The technicians run the EP entirely on the appropriate equipment of the Indian Customer to verify its proper functioning. 18. In view of the above, it is clearly evident that the contract is for Maintenance and Repair of MERMOZ system which is used for testing the air worthiness of the aircraft. Therefore the impugned services are relevant to maintenance and repair services of instruments for testing airworthiness of an aircraft. In this regard we invite reference to the Explanatory Notes to the Scheme of Classification of Services. The relevant SAC codes are as under:- 9987 : Maintenance, repair and installation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of GST of 5% is not applicable. 20. Now, we proceed to examine the second question which is subject to the affirmative answer to the first question. As the first question is answered in negative, this question becomes redundant and no ruling is offered in this regard. 21. The third question which is subject to the answer of first question in negative. We proceed to examine the third question as the first question is answered in negative. The third question has two components (i) as to what is the classification of services provided to the parent company and (ii) whether it can be considered as export of service. The classification of the impugned services is answered in paras 18 and 19 supra, as maintenance and repair services of other machinery and equipment under SAC 998719. The second portion to be answered is whether the impugned services amount to export of services or not. In this regard we invite reference to the definition of "export of services" given in Section 2(6) of the IGST Act 2017.- Section 2. Definitions. - (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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