Site icon SCC Times

KAAR| Maintenance and repair services of test bench equipment used for testing air worthiness of an aircraft does not qualify to be an aircraft or its engine or other aircraft components

   

Authority for Advanced Ruling (Karnataka): In an application seeking advance ruling on whether services provided by the applicant to its parent company relating to test benches are classifiable under maintenance, repair or overhaul services in respect of aircrafts, aircraft engines and other aircraft components, hence taxable at the rate of 5 percent goods and services tax (‘GST’), the two-member bench of M.P Ravi Prasad and Kiran Reddy T has said that the applicant’s services are classifiable as maintenance, repair services of other machinery and equipment, as the applicant is providing maintenance and repair services of test bench equipment used for testing air worthiness of an aircraft services, hence not taxable at the rate of 5 percent GST.

The applicant sought advance ruling on the following:

  • Whether the services provided by the applicant to its parent company relating to the test benches be classified as maintenance, repair or overhaul services in respect of aircrafts, aircraft engines and other aircraft components?

  • If the answer to the above is in affirmation, then whether the place of supply is the location of the recipient as per the Notification no. 02/2020 -integrated tax which is the location of the Parent company (outside India) and that can be construed aa exports.

  • If the answer to the first question is in negation, then what will be the classification of the services provided by the parent company and can it be considered as export of services?

The Authority noted that the applicant is a wholly owned subsidiary of Speherea Test Services. The parent company has entered into an agreement to provide a set of services with a customer in France, who in turn has entered into an agreement to provide such set of services to a customer in India. Thus, the parent company has subcontracted the applicant for providing services with respect to test benches to Indian Air Force (‘IAF’) and shall raise invoice to its parent company as they do not have direct contract with Indian customer (IAF).

The Authority, after examining the agreement entered by the applicant with the parent company, said that the parent company is a provider of test solutions in the field of aircraft. Further, the contract is for maintenance and repair of a system that is used for testing the air worthiness of the aircraft. Thus, the applicant’s services are classifiable under heading 998719 as maintenance, repair services of other machinery and equipment, as the applicant is providing maintenance and repair services of test bench equipment used for testing air worthiness of an aircraft. The said equipment does not qualify to be an aircraft or an aircraft engine. Further, to be termed as other aircraft components it should form a component of aircraft and, hence, not taxable at the rate of 5 percent GST.

The Authority offered no ruling for the second question as it was subject to the first question answered in affirmative, and as it is answered negatively, this question becomes redundant.

The Authority considering the third question, referred to Section 2(6) of the Integrated Goods and Services tax Act, 2017, and said that the place of supply needs to be determined to decide whether the impugned supply of services by the applicant amounts to export of services or not. Further, as determination of place of supply is beyond its jurisdiction, the Authority has not answered that.

[Testmesures Spherea Solutions Pvt. Ltd., In re, 2022 SCC OnLine Kar AAR-GST 28, decided on 02-12-2022]


Advocate who appeared in this case :

Represented by: Chartered Accountant Nikhil Jain;


*Apoorva Goel, Editorial Assistant has reported this brief.

Exit mobile version