Authority for Advance Ruling — Taxability on reimbursement received – The applicant is a global service provider, engaged in providing various oilfield services to Exploration and Production companies across the globe. The Applicant has contracted for supply of bundled oilfield services to support the various oil and gas related operations in KG Offshore, East Coast of Indian Offshore waters. The applicant sought an advance ruling regarding determination of liability and consequent classification to pay GST on reimbursement received towards Lost in Hole / Damages beyond Repair equipment (LIH equipment) i.e., whether reimbursement received towards LIH equipment can be considered as a supply as per Section 7 of the Act and hence, liable to GST; if reimbursement received towards LIH equipment can be considered as supply and liable to GST, what would be the classification and the rate of GST applicable on such supply; whether the same would be treated as “agreeing to tolerate an act” as per clause 5(e) of Schedule II of the CGST Act, 2017 and subject to GST at the rate of 18% or the same would be treated as a composite supply of works contract service and thus, GST can be charged at the rate of 12% applicable for supply of composite works contract services.
Held that:- The Hon’ble Authority for Advance Ruling held that the reimbursement received towards LIH equipment is taxable and classifiable as Supply of Goods in terms of Section 7 of the Act. Depending upon the nature of actual goods involved in the subject activity, their classification is as per HSN notified for the goods and the Classification Rules made in this regard. Accordingly, the provisions relating to chargeability and levy of GST under the Act and the Rules made there under as applicable to the supply of goods will apply.—Halliburton Offshore Services Inc. (Lih), In Re… [2020] 24 TAXLOK.COM 055 (AAR-AP)