ORDER

(Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017)

1. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by M/s Ocean Sparkle Limited, (hereinafter referred to as applicant), registered under the Goods & Service Tax.

2. The provisions of the CGST Act and APGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the APGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act.

3. Brief Facts of the case:

M/s. Ocean Sparkle Limited is a company (hereinafter referred to as the Applicant) incorporated on 26th July 1995 having its registered address at Plot No 128, Srinagar Colony, Hyderabad, Telangana. The applicant is engaged in the business of providing comprehensive port operations and management services which inter alia includes provision of technical management of marine crafts, harbour towage services, mooring services, pilotage services etc.

The applicant had filed an application in form GST ARA-01, Dt: 31.07.2019, by paying required amount of fee for seeking Advance Ruling on the following issues, as mentioned below.

4. Question raised before the Authority:

This application for Advance Ruling is being filed seeking the rate of IGST on vessel charter hire charges?

On Verification of basic information of the applicant, it is observed that the applicant falls under State jurisdiction, i.e. Assistant Commissioner (ST), Kakinada Circle. Accordingly, the application has been forwarded to the jurisdictional officer and a copy marked to the Central Tax authorities to offer their remarks as per Sec. 98(1) of CGST /APGST Act 2017.

In response, remarks are received from the jurisdictional officer concerned stating that there are no proceedings lying pending or passed relating to the applicant on the issue, for which the Advance Ruling sought by the applicant.

5. Applicant’s Interpretation of Law and Facts:

5.1. The Applicant submits that the Tug Jupiter let out by it to RIL on charter is correctly classifiable under SAC 996602 as ‘Rental Services of water vessels including passenger vessels, freight vessels and the like with or without operator’ as the said Code covers hiring of water vessel for transportation of good and thus, would attract GST @ 5% in terms of SI. No. 10(ii) which covers ‘Time charter of vessels for transport of goods.’,

5.2. The expression ‘Goods’ has been defined in Section 2(52) of the CGST Act, 2017 to mean “every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply”. The Tug Jupiter has been chartered for undertaking inter-alia the following activities (the primary gamut of activities enlisted at para 7 of the Annexure-I to this application):-

• Transporting the hawser and hose pipe to the tanker which has been berthed for loading the crude oil from the FPSO.

• Passing mooring hawser pick-up rope and floating hose tail end from FPSO to Off-take Tanker.

• Passing floating hose string from FPSO stern to Off-take tanker mid-ship cargo manifold.

5.3 The Applicant submits that inasmuch as the primary function carried out by the Tug Jupiter is one of transporting the hawser and hose pipe, which in-turn is clearly covered within the scope and ambit of the expression ‘Goods’ as defined under Section 2(52) of the CGST Act, 2017, the said let out of the Tug Jupiter on charter basis, being hiring of a water vessel for transportation of goods, is clearly classifiable under SAC 996602.

5.4 The Applicant submits that in the alternate, since the services rendered by the Tug Jupiter are in relation to oil exploration activities, the same clearly also qualifies as a lifting and handling equipment for the offshore operations which are being conducted at the MA-D26 Oil and Gas Field, which is about 20 nautical miles south east off Kakinada on the east coast of India approximately in 1100-1400 m. depth of water.

5.4.1 The Applicant submits that the charter services of Tug Jupiter being let out in the nature of leasing or hiring of machinery, the same is clearly covered by the SAC 997319 for the reason that this SAC specifically covers machinery and equipment on leasing or hiring basis as against SAC 996602 which covers only rental of vessels.

5.4.2 The Applicant submits that there can be no dispute as to the fact that a tug is a machinery. In as much as the tug in question viz. Jupiter being amachinery, hiring or leasing of the same is clearly covered within the scope and ambit of the SAC code 9973. This position is further substantiated from a perusal of the entry at (vii) and (v) of Sr. No. 17 of the Notification no. 1/2018-IT (Rate) dated 25.01.2018 read with Notification No. 8/2017-IT (Rate) dated 28.06.2017, which includes time charter of vessels for transportation as also the chartering of aircrafts respectively. Accordingly, it is submitted that the charter services of Tug Jupiter are clearly classifiable under SAC 9973.

5.4.3 Without prejudice to the above, the Applicant submits that since the entry at SI. No. 17(viia) now specifically covers leasing of goods and as already submitted that Jupiter, being a lifting and handling equipment, clearly falls within the meaning of the expression ‘Goods’, the said service supplied is clearly classifiable under SAC 9973 and further covered within the scope of entry at SI. No. 17(viia) of the Notification.

6. Record of Personal Hearing:

Sri Ramakrishna Vuppuluri, the authorized representative of the applicant filed for adjournment on 18.09.2019. Later on, appeared for Personal Hearing on 23.10.2019 and they reiterated the submission already made in the application

7. Discussion and Findings:

We have examined the issues raised in the application. The taxability and the applicable rate of tax for the goods and services supplied or to be supplied, as governed under the provisions of respective GST Acts are examined.

In view of the submission made by the applicant we find that the basic issue before us is whether the Tug Jupiter that the Applicant has let out under a charter for 730 days (with an option to extend the contract one year more) is classifiable under SAC 996602 as ‘Rental Services of water vessels including passenger vessels, freight vessels and the like with or without operator’ attracting GST @5% in terms of SI. No. io(ii) which covers ‘Time charter of vessels for transport of goods’ of Notification No. 1/2018-IT(Rate) dated 25.01.2018 read with Notification No. 8/2017-IT(Rate) dated 28.06.2017 or under SAC 997319 as ‘Leasing or rental services concerning other machinery and equipments with or without operators’ attracting GST @5% in terms of Si. No. 17(viia) of the Notification no. 1/2018-IT(Rate) dated 25.01.2018, as amended by Notification No. 28/2018-IT (Rate) dated 31.12.2018 which covers ‘Leasing or renting of goods’ or attracting GST @5% in terms of SI. No. 17(vii) of the Notification No. 1/2018-IT(Rate) dated 25.01.2018 (as amended), which covers ‘Time charter of vessels for transport of goods’

Before proceeding with the submission on merits, it would be pertinent to refer to the competing entries under which the services rendered by the Tug Jupiter, let out on charter basis by the Applicant to RIL, could be classified, which are set out as below vide Notification No. 1/2018-IT(Rate) dated 25.01.2018 read with Notification No. 8/2017-IT(Rate) dated 28.06.2017.

Sl.No	Chapter, Section, Heading	Description	Rate of Tax	Condition
10	Heading 9966 (Rental services of transport vehicles)	(ii) Time charter of vessels for transport of goods.	5	Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) has not been taken

The Explanatory Notes to the classification of services under the GST Act provides as under: Service Accounting Code 996602: Rental services of water vessels including passenger vessels, freight vessels etc., with or without operator:-

“This service code includes rental services of all types of self-propelled passenger/freight vessels including tankers, bulk dry cargo vessels, cargo and freight vessels, tugboats and fishing vessels for coastal, inland and transoceanic water transport with/without crew

Service Accounting Code 997319

Sr.No.	Chapter, Section, Heading or Group	Service Code (Tariff)	Service Description
232	Heading 9973		Leasing or rental services with or without operator
233	Group 99731		Leasing or rental services concerning machinery and equipment with or without operator
		997319	Leasing or rental services concerning other machinery and equipments with or without operator.

The Explanatory Notes to the classification of services under the GST Act provides as under:

Service Accounting Code 997319: Leasing or rental services concerning other machinery and equipment with or without operator:

This service code includes:

– leasing, renting or hiring services concerning all kinds of machinery, whether or not electrical, except personal or household goods, generally used as capital goods by industry, such as engines and turbines, machine tools, mining and oilfield equipment, lifting and handling equipment, coin/card operated gambling machines, exhibition material, professional, scientific measuring and control apparatus, accommodation and office containers, other commercial and industrial machinery etc.

– To expand the scope of ‘Leasing or rental services concerning other machinery and equipments with or without operator.’ as given in the basic definition by bringing within its ambit, the impugned services of leasing of Jupiter Tug’ would not normally get covered by any stretch of imagination as the definition indicates that they have no nexus. It is true that a tug by itself to make itself propelled could have machinery installed. Whereas, Machinery means a group of machines combined together to make a task easy.

While denying Exemption of payment of duty to Tugs and barges, Hon’ble Tribunal in the case of SHIPPING CORPORATION OF INDIA LTD. Vs COMMR. OF CUS. (IMPORT), MUMBAI reported in 2014 (312) E.L.T. 305 (Tri. – Mumbai), categorically, held that they are not machinery, equipment or tools. In an appeal to High Court in the case, the court ratified the same and hence a tug is not a machinery, equipment or tools independently but considered to be a vessel.

In this context, we are of the opinion that the Tug Jupiter let out by the applicant to RIL on charter basis is classifiable under Sl.No.10 of Heading 9966, vide Notification No. 1/2018-IT(Rate) dated 25.01.2018 read with Notification No. 8/2017-IT(Rate) dated 28.06.2017.

RULING

(Under Section 98 of Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017)

Question: The rate of IGST on vessel charter hire charges of Tug Jupiter let out on rent to RIL by the applicant?

Answer: Classifiable under SI.No. 10 of Heading 9966, vide Notification No. 1/2018-IT (Rate) dated 25.01.2018 read with Notification No. 8/2017-IT (Rate) dated 28.06.2017 as amended from time to time attracting tax rate of 5%, subject to fulfilling of the conditions attached to it.