Background
The Indian GST framework treats international service transactions according to well-defined rules under the Integrated Goods and Services Tax (IGST) Act, 2017. For maintenance and repair services (MRO) provided to foreign vessels/Aircraft, determining whether GST applies primarily on the place of supply rules as laid out in Section 13 of the IGST Act, and trade facilitative clarifications issued by the government.
Key Provisions
Section 13(3)(a) of the IGST Act, 2017 provides:
“The place of supply of the following services shall be the location where the services are actually performed: services supplied in respect of goods that are required to be made physically available by the recipient to the supplier in order to provide the services…
Relevance:
Before 2021, this section was strictly applied to services like maintenance and repair, where foreign vessels/ Aircraft physically came into India and were serviced here. Since the services were performed in India on goods (i.e., the vessel), the place of supply was India, and GST was applicable even if payment was received in foreign exchange.
Section 13(13) empowers the Central government to notify the Place of the supply of services to avoid double taxation and uniform applicability of the rules.
The government of India had by issuing Notification 03/2021 IGST and 02/2020 IGST, has notified the POS location of recipient of service of the such MRO service to vessel and Aircraft respectively subject to specified conditions
GST Implications and Export Classification
Under the updated legal framework: If a foreign vessel (registered and owned/operated by a person based outside India) comes to India for maintenance or repair,and overhaul) and
(i).The recipient is located outside India,
(ii)Payment is received in convertible foreign exchange (or INR wherever permitted under FEMA),
(iii)The supplier and recipient are not mere establishments of the same person,
Then, the services qualify as “export of services” per Section 2(6) of the IGST Act. As exports are zero-rated supplies, no GST is charged, and the supplier can claim refund of any input tax credit.
simmilary if any Indian vessel or aircraft avail such service outside India then it shall be qualify as import of service and tax will be payable are under reverse charge basis.
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Warning : Above analysis is strictly personal of the author. Whether any trasaction qualify as exports of service and import of service need to check on case to case basis.
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