Change in Place of Supply of Maintenance, Repair and Overhaul (‘MRO’) services of Vessel
- Blog|GST & Customs|
- 2 Min Read
- By Taxmann
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- Last Updated on 4 March, 2022
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1. Introduction
Foreign ships/vessels arriving in India go for Maintenance, Repair and Overhaul (MRO) services during the intervening period (i.e. between arrival and departure). The place of supply of the impugned services was[1] the place where the MRO services are performed (i.e. India). Therefore, before amending the place of supply these services provided by MRO units in India to foreign shipping companies are exigible to GST.
The GST Council in its 43rd meeting recommended the change in place of supply of the impugned services. To give effect to this decision, the Government has issued Notification No. 03/2021-Integrated Tax dated 02-06-2021 (‘the relevant Notification’).
This article discusses the amendment and its possible implications on MRO Sector dealing with Ships/Vessels.
2. Relevant Provision under GST laws
Under the place of supply provisions[2], there is a specific provision for determining the place of supply in a case where services are performed on goods that are made available by the recipient, etc. to the supplier. The place of supply in this case shall be the place where the services are actually performed.
By virtue of the relevant Notification, the place of supply of this transaction has been changed to the ‘location of service recipient’. This amendment has been made similar to changes that were implemented[3] earlier for MRO services in respect of Aircraft, Aircraft’s engines, etc.
3. Impact of this Amendment
This change would make the services provided by Indian MROs to Foreign Shipping Company as export of services[4]. The change in place of supply would enable the Indian MRO units to compete better with the foreign MROs.
We may note that the change in the place of supply of the impugned transaction would also impact the Indian shipping companies receiving services from Foreign MROs outside India. In such cases, GST under reverse charge would be payable by the Indian Shipping companies.
[1] Section 13(3)(a) of the IGST Act, 2017
[2] Section 10 to Section 14 of the IGST Act, 2017
[3] Notification No 02/2020 Integrated Tax Dated 26 March 2020
[4] Provided other conditions of Export of Services are satisfied
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Thanks for sharing this post. MRO is an essential, and unavoidable, aspect of every Operation and Procurement for any organization