Advance Ruling for GST on Reimbursement of expenses by foreign company to Indian Company

Case Law Details

Brief about Applicant:

Maans Marine Cargo International LLP is mainly engaged in to Management consultancy services to ship owners, logistics services through water etc. in Mumbai having registered address at 1102, Gambs Tower CHS Ltd, 4, Bungalow Road, Andheri West, Mumbai - 400 053.

The applicant had applied for GST registration previously but cancelled the same with effect from 28/05/2018 as the turnover was not exceeding the exemption limit.

Brief about Foreign Company:

MSS Marine Ltd. 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 and other Asian countries including India, Thailand, China, Korea, Taiwan, Singapore. A few of their vessels also trade into Europe having registered office at Unit M, 1/F., Mau Lam Comm. Bldg., 16-18 Mau Lam Street, Jordan, KLN, Hong Kong.

Brief about the Transaction:

Maans Marine Cargo International LLP and MSS Marine Ltd proposed to enter into an outsourcing agreement through which Maans marine Cargo International LLP shall provide backend services in respect of foreign business carried out by MSS Marine Ltd in Hong Kong.

The Services to be provided by Maans Marine Cargo International LLP are as follows:-

• Handling all communications between vessel owners, shippers, consignees, various port agents. Passing information to all parties with regards to vessel schedule & her operations.
• Drafting contracts of shipments and sending the same to ship owners and shippers or characters as the case maybe.
• Preparing reports on time used per voyage and presenting to shippers reports on additional time used per shipment.
• Preparing invoices on behalf of clients as per contract and presenting them to charterers as per approval from principals.
• Reconciling accounts for our principal.
• As required travel to various countries at principals cost to meet with port agents, shippers, charterers to discuss operational efficiency.

The above services will be provided by the applicant on his own account.

Applicant would be incurring the following expenses approximately to carry out the above job: -

1. Salary to employees – Applicant shall employ 10-15 experienced ship operators and office assistants on behalf of MSS Marine Ltd and total salary would be approximately between Rs 7-10 lacs per month which will be reimbursed on actual basis from the MSS Marine Ltd.
2. Office would be taken on rent & the rent would be reimbursed on actual basis from MSS Marine Ltd
3. Office expenses such as telephone expenses, electricity, purchasing computers, internet, office furniture, staff welfare, etc. will also would be reimbursed on actual basis from MSS Marine Ltd
4. Travel costs such as tickets, lodging boarding on actual basis
5. Applicant will charge management fees from MSS Marine Ltd for managing the above job.

Note - Applicant has withdrawn question nos 1 and 2. Jurisdictional Officer was not present for the preliminary hearing.

ORDER

(Under Section-98 of CGST Act 2017, and The Maharashtra Goods & Services Tax Act ,2017)
No.GST-ARA-04/2019-20/B-97 Mumbai dt.23.08.2019

For reasons as discussed in the body of the order, the questions are answered thus-

Q.1- Whether we need to apply for GST registration as the service provided are export of Services?

Ans- Withdrawn by Applicant.

Q.2- Whether we can do supply of such services under LUT?

Ans-  Withdrawn by Applicant.

Q.3- Whether GST is applicable on the reimbursement of expenses such as salaries, rent, office expenses, travelling cost etc?

Ans- Answered is the affirmative.

Q.4- Whether GST will be applicable on the management fees charged by us to the Company for managing the job outsourced to us?

Ans- Answered is the affirmative.

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