Ocean freight on CIF imports subject to GST under reverse charge mechanism per Notification 10/2017

The AAAR, Uttar Pradesh ruled that the appellant must pay GST on ocean freight under reverse charge mechanism (RCM) for CIF imports per Notification No. 10/2017-Integrated Tax (Rate). The authority held that GST on freight component is taxable for both imports and exports to provide level playing field for domestic shipping lines. Regarding alleged double taxation on indigenous supplies freight, the AAAR applied Notification No. 13/2017-CT (Rate) requiring GST payment under RCM, determining this as revenue neutral exercise with no additional financial impact on appellant.

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Issues:
1. Appeal against Advance Ruling Order No. UP 63/2020 dated 10.07.2020.
2. Liability to pay GST under reverse charge mechanism on freight for indigenous supplies.
3. GST liability on ocean freight in case of imports on CIF value under RCM.

Issue 1: Appeal against Advance Ruling Order
The appeal was filed under Section 100 of the Central Goods and Service Tax Act and Uttar Pradesh Goods and Service Tax Act, 2017 against Advance Ruling Order No. UP 63/2020 dated 10.07.2020 issued by the Authority for Advance Ruling, Uttar Pradesh. The appellant, a registered assessee under GST, challenged the ruling given by the Advance Ruling Authority.

Issue 2: Liability on Freight for Indigenous Supplies
The Appellant sought clarification on whether GST needs to be paid again on the freight under reverse charge mechanism for indigenous supplies. The Advance Ruling Authority ruled that as per Notification No. 13/2017-Central Tax (Rate), the appellant is liable to pay GST on the freight under RCM. The Appellant contested this ruling citing various legal arguments, including the Hon'ble Gujarat High Court judgment.

Issue 3: GST Liability on Ocean Freight for Imports
Regarding the GST liability on ocean freight in case of imports on CIF value under RCM, the Appellant questioned if any further GST liability exists. The Appellate Authority upheld the ruling by the Advance Ruling Authority, stating that in the case of import of goods on CIF basis, the appellant is liable to pay GST on the ocean freight component. The Authority clarified that the service of transportation of goods by a foreign shipping entity to a port in India is an 'inter-state supply' under the IGST Act.

Discussion and Finding:
The Appellant's arguments were based on legal interpretations and precedents, including the judgment of the Hon'ble Gujarat High Court. The Authority analyzed each submission and found that the rulings given by the Advance Ruling Authority were valid. The Authority emphasized the importance of the Notification No. 13/2017-Central Tax (Rate) and Notification No. 10/2017- Integrated Tax (Rate) in determining the GST liability on freight for indigenous supplies and ocean freight for imports, respectively.

Ruling:
1. Regarding the GST liability on freight for indigenous supplies, the ruling given by the Advance Ruling Authority was upheld, and no interference was deemed necessary.
2. As for the GST liability on ocean freight for imports on CIF value, the Authority refrained from passing any order due to the matter being sub judice before the Hon'ble Supreme Court. The Authority highlighted the pending appeal and the issuance of notices by the Supreme Court, indicating that any decision on this matter should await the Supreme Court's ruling.

This summary provides a detailed analysis of the judgment, covering all the issues involved comprehensively.

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