Line Type derivation logic on a Drop-Ship Purchase Order

We are creating a Sales Order for an item whose setup in PIM is as Inventory Item = NO; which implies it is a service item.
We are creating a drop-ship Purchase Order from the Sales Order and the Line Type on the line item on the PO is always showing up as 'GOODS' only whereas it should be showing 'SERVICES'.

Is my understanding correct? Or is the Line Type getting defaulted from any setup configuration?