In re Translog Direct Private Limited (GST AAR Tamil Nadu)
In the case at hand, the applicant is extending the ‘support services for water transport’ which includes services facilitating berthing of the vessel, liaising with jurisdictional authorities and attend to the requirement of the vessel when the vessel is in Indian territory and the service jurisdiction of the applicant rests with the applicant until the vessel exits the Indian waters. Thus, the applicant extends vessel related services to their customers when the vessel enters the Indian territory and the service with respect to the said vessel ends when the vessel exits the Indian territory. In other words, the proposed services are rendered in respect of the vessels which are physically available in the Indian Territory and therefore, we find that the proposed services are squarely covered under Section 13(3) above.
Accordingly, the place of supply of service in the location 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 si.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.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, TAMIL NADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section |1) of Section 100 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 circumstances.
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1 The applicant has referred to Section 95(a), 95(c) and 97(2) of Central Goods & Service Tax Act, 2017 and has stated that they would like to seek clarification on the questions mentioned above on the ground that they have jurisdiction to file the advance ruling since they have registered themself as a ‘company’ under the Companies Act, 2013 to provide services to their customers overseas and raise questions on the classification of such proposed services.
2.2 They have further stated that they are a newly incorporated Company incorporated under the Companies Act, 2013 and they have their registered corporate office located at C 301 Harshvardhan CHSL, Saki Vihar Road, Andheri East, Mumbai Suburban 400072. They are not currently registered under GST as they do not meet the threshold requirements for registration as per Section 24 of CGST Act, 2017 as the Company is in the process of commencement of its operations. They have been incorporated with the 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 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 operations while the vessel/ship is in India. Their main intention is to provide end-to-end solution to their overseas customers in the form of assisting/supporting while the vessel(s) arrive in India. As a result, they intend to supply ‘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 its shipments coming into India for further 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 Territory; and
c. Co-ordinate with stevedores and other relevant parties, reporting to appropriate authorities and arranging and checking documentation;
d. 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;
e. Attend the Master and all crew matters, consular requirements, organizing medical and dental treatment and supervising crew changes;
f. 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.
g. Order and receive goods, services and supplies for the vessel;
h. Make arrangements for receiving bunkers (fuel)
i. Arrange and coordinate repairs including spares and professional services; and
j. Perform all other activities to support the day to day running of the vessel while in Port including overseeing or supervising the functions of third parties engaged by the Applicant.
k. Service recipient’s requirements concerning claims handling. All expenses involved with claims handling are for the Service Recipient’s account.
The Applicant has further stated that they will not be providing any port service to the charterers/shipping lines. Thus, the contract for aforesaid services will be between the Applicant (as the service provider) and the charterers/shipping lines (as service recipients) and it is the responsibility of the Applicant to provide the services specified above. Further, it will also not play any role in arranging, marketing or finalizing the supply of goods/ services between the Indian customers with the overseas charterers.
2.5 On their interpretation of law, the Applicant has made the following submissions, each of which is requested to be taken in the alternative and without prejudice to each other:-
1. The proposed ‘support services’ rendered by them cannot be classified as an intermediary service
> As far as ‘support services’ are considered, there is no explicit definition given under the GST legislation. Therefore, they have referred to the corresponding definitions 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 necessary only during travel into and exiting the ports of India. Therefore, the scope of services is limited and within the boundaries of India only. Such services are in fact outsourced to them which could have normally been performed by their customers but for lack of resources or to increase efficiency, the same is contracted out to them. This gives light to the fact that the scope of services is supporting in nature.
> In furtherance of this and in light of the definitions relied above, the scope of services enumerated include within its ambit accounting and processing of transactions. They also procure and contract on their own account with third-party vendors services which are in relation to the business and commerce of the overseas charterers/shipping lines so as to provide an end-to-end support solution by having oversight of the functions of third-party vendors such as checking of the invoices for the transactions entered with third-party vendors or the quality of the third-party port services for the vessels coming/exiting India.
> In support of the above-mentioned contentions, they have placed reliance on a catena of cases extracted below:-
a. Global Transportation Services Pvt Ltd. [2016 (45) STR (AAR)] –
b. Universal Services India Pvt Ltd [91 VST 483 (AAR
c. M/s. Evalueserve.com Pvt Ltd v. CST, Gurgaon [2018 (3) TMI-1430 (CESTAT Chandigarh]
> The definition of intermediary under Section 2(13) of IGST Act, 2017 give rise to three ingredients to be satisfied:-
a. He must be a broker or an agent or any other person by whatever name called who arranges or facilitates the supply of goods or services or both.
b. The supply arranged or facilitated must be between two or more persons.
c. He should not be the person who supplies the goods or services or securities on his own account.
> The facts enumerated herein by them stipulates a transaction wherein the business of the newly incorporated company will be to procure and provide services on a Principal to Principal (P2P) basis. There is no agency agreement between them and their overseas customers who will contract with third-party vendors on their behalf, rather it will be in fulfillment of their business motto.
> It cannot be automatically deemed that the Applicant is an agent of the charterers/shipping lines just because they support the flow of the 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 transaction will not satisfy the third condition necessary to fulfill the concept of an ‘intermediary’ under the laws of GST as well as the fact that there is no facilitation happening between the overseas charterers/shipping lines and their end customers in India.
> In furtherance of this, the applicant placed reliance upon following rulings:-
a. GoDaddy India Web Services Pvt Ltd [2016 (46) STR 806 (AAR)] –
b. In Re: M/S. Fulcrum Info Services LLP [2019 (10) TMI670] –
> support services to overseas customers or even related/parent companies will not qualify as intermediary service but as export of service. To support this contention, it is pertinent to note that in the advance authority ruling (AAR) of In Re: M/S. Nes Global Specialist Engineering Services Private Limited [2019 (11) TMI 478], the ruling passed was based on the facts and merits of the case which held that the transaction under debate was not an intermediary service but export of support functions rendered to its parent company. However, tire appellate authority has subsequently taken a contrary view and enunciated a ruling based on jurisdictional authority as not being maintainable in the eyes of law. Such ruling is basis the rationale that, to determine export service, ruling will also have to determine “place of supply” provision which as per their opinion is not covered within the ambit of advance ruling. Therefore, the conclusion to such case is based on the jurisdictional challenge faced by the appellate authority whereas the lower authority has classified the transaction to be exports based on the quality and worthiness of the application wherein all the conditions are satisfied.
> The definition of intermediary in the service tax regime (Pre-GST) is identical to the meaning incorporated under GST laws. Accordingly, it is relevant to refer para 5.9.6 of CBEC Education Guide (2012). In this case, the Indian customers of the charterers are not receiving any service by them. They are not liaising with the customers of the charterers/operators nor providing them any service in lieu of the supply of goods to them. The only service point is with respect to the supply of ‘support services’ to the charterers/operators.
> To conclude, the proposed transaction should be classified under SAC 9985 given under Notification No. 11/2017-Central Tax (Rate) dated 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:
