In re Maansmarine Cargo International LLP (GST AAR Maharashtra)
Whether GST is applicable on reimbursement of expenses such as salaries, rent, office expenses, travelling cost etc.?
Applicant is not a pure agent. In the subject case the applicant is making payments to vendors for supply received by them. The applicant is not making payment to the third party for the services rendered by such third party to the recipient of supply, under a contract for supply. In the subject case the recipient of supply is not liable to make payment to third parties and therefore it can be said that the applicant is not making payments on behalf of the recipient of supply. Hence it is seen that conditions mentioned at 1 to 3 above are not fulfilled in the subject case and therefore the applicant is not acting as a pure agent of the recipient of supply.
Further, the applicant has cited CBDT Circular no. 107/26/2019-GST of CBDT dated 18th July, 2019 and have contended that they are providing ITes services as defined in Section 10TA of Income Tax Rules, 1962 to MSS Marine Ltd on their own account. The said Circular is not applicable to GST Laws and therefore we are not discussing the same in this order.
The reimbursement received by the applicant pertains to establishment costs which would be incurred by them for running their office in India. In any normal business such expenses are borne by the supplier of service and it is but natural that they would include such costs in the value to be received from the recipient of their services. In the subject case the said costs, are termed as reimbursements and are recovered in addition to management fees from their clients and therefore it is nothing but additional consideration charged for the supply in this case. The provisions of Section 15 of the CGST Act, which deals with the transaction value are very clear and as per the said provisions the valuation of supply will include all costs, including the employee cost provided by one distinct entity to the other distinct entities.
Whether GST will be applicable on the management fees charged by us to the Company for managing the job outsourced to us?
Since we find that the applicant is an intermediary, as per the provisions of Section 13 (8)(b) of IGST Act, the place of provision of the service in the subject case is the location of the supplier of services i.e. the applicant and since the place of supply is in taxable territory, we hold that they will be liable to discharge GST on such services provided by them. Therefore we hold that GST will be applicable on the management fees charged by the applicant.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by M/S. MAANSMARINE CARGO INTERNATIONAL LLP, the applicant, seeking an advance ruling in respect of the following questions.
1. Whether we need to apply for GST registration as the services provided are export of services?
2. Whether can we do supply of such services under LUT?
3. Whether GST is applicable on the reimbursement of expenses such as salaries, rent, office expenses, travelling cost etc.?
4. Whether GST will be applicable on the management fees charged by us to the Company for managing the job outsourced to us?
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 any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression ‘GST Act’ would mean CGST Act and MGST Act.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
“We are mainly in to Management consultancy services to ship owners, logistics services through water etc in Mumbai. Previously we had applied for GST registration, however, as our turnover was not exceeding the exemption limit we have applied for cancellation of GST registration w.e.f. 28/05/2018.
Now, we have been offered an outsourcing work of managing the shipping operations of Hong Kong based shipping company MSS Marine Ltd, which is involved in worldwide shipping consultancy and logistics arrangement of cargoes. Primarily their ships trade between several ports in middle east countries of Saudi Arabia, UAE & other Asian countries including India, Thailand, China, Korea, Taiwan. Singapore. A few of their vessels also trade into Europe.
MSS Marine will outsource the following job to us:-
