Kerala AAR rules that 18% GST will be charged on houseboat services

Summary:

• Kerala AAR in a recent case ruled that 18% GST will be charged on houseboat services for day trips as well as overnight trips.
• The input tax credit will be available on refurbishment expenses, furnishing, maintenance, repairs, food, and drinks served on the boat as a part of the package

Kerala AAR stated that houseboat services or cruise services, be it for overnight stays or a day trip, fall under the category of ‘passenger transport services’ for tax classification purposes. Therefore, it shall attract 18% GST. However, it shall also be able to claim ITC (Input Tax Credits) on purchases required to fulfil these services, refurbishments made to the cruise/houseboat, furnishing expenses, repairs, and maintenance.  

Facts of the case:

• The applicant, EVM Motors and Vehicles is a major automobile dealer in Kerala. As a part of the business expansion, the applicant under the name ‘Le Leela’ entered the business of hospitality.
• The applicant acquired houseboats and refurbished them for being used as cruise boats for one-day trips as well as overnight stays.
• The houseboats have living rooms, bedrooms, kitchen etc. and are suitable for living.
• Food is provided as a part of the package. Alcohol is provided too but is billed separately.
• The rate to be charged by the applicant to the customers is an all-inclusive fare. It includes transportation, accommodation, and all other incidental services.

The applicant sought out an advance ruling, seeking whether these services will fall under the purview of GST, whether the rate will be 18% and whether Input tax credit will be available. The matter was examined in detail by the authorities.

Judgement:

The Kerala AAR ruled that the applicant’s service would fall under 'passenger transport services', the subcategory being 'water transport service of passengers'. The rate applicable for such services is 18%. The applicant is also entitled to claim an input tax credit on the supplies used for the provision of these services. That is the applicant may claim an input tax credit on refurbishing, furnishing, repairs and maintenance of the vessel. Even input tax credit on food used as a part of the service can also be claimed by the applicant. General insurance and services for the said vessel may also have input GST and this is also eligible for the input tax credit.

AAR rulings resolve practical problems faced by taxpayers. They help the taxpayers with required clarifications and timely insights into tax rules. Sometimes, they bring about significant changes in the way of execution, too. We post about AAR rulings from time to time. You can go through our blog to find out more about the recent changes related to GST.

Avalara helps businesses of all sizes in automating tax compliances. Be it selling within the country or across the border, we are up to date and prompt and can help you make your tax compliance hassle-free. To know more about the services that Avalara offers, visit our website and schedule a demo. Use Avalara for automating your cross border compliance. Click here to find out more.