2018 (6) TMI 431 - AAR - GST

GST Ruling: Reverse Charge on Ocean Freight, Input Tax Credit Clarifications, and Asset Classification for Tax Purposes

In Re : Bahl Paper Mills Ltd.

The SC/HC ruled on three key GST issues: (1) IGST must be paid under Reverse Charge Mechanism for ocean freight in CIF contracts, even when service ... Levy of IGST - Reverse charge mechanism - ocean freight in case of CIF basis contract - Credit of GST on various assets - Whether under Reverse Charge Mechanism, IGST should be paid by the importer on ocean freight in case of CIF basis contract, when service provider and service recipient both are outside the territory of India? - Held that:- Vide N/N. 8/2017- Integrated Tax (Rate) dated 28.6.2017 and N/N. 10/2017- Integrated Tax' (Rate) dated 28.6.2017 an importer is required to pay IGST on the ocean freight. Therefore as on date, even if the importer has already paid IGST on CIF value imported goods, he is still required to pay IGST on ocean fright. What will be the supporting document for importer under RCM to take the credit of IGST paid on ocean freight under CIF basis contract? - Held that:- Credit of IGST paid can be taken on the basis of invoice/challan issued. Whether credit will be available in GST of office fixtures & furniture, A.C. plant & sanitary fittings on newly constructed building on its own account for furtherance of business and accounting entry is capitalized in books of account? - Held that:- As per explanation to the Section 17 of CGST Act, 2017 credit is not available in respect of land, building or any other civil structure - Cenvat Credit of GST paid in relation with building or any other civil structure is not available and since sanitary fittings are integral part of building or any other civil structure, cenvat credit of GST paid on such sanitary fittings is not available - However, credit of GST is available on office fixtures 85 furniture, A.C. plant. Issues:1. Whether IGST should be paid under Reverse Charge Mechanism on ocean freight in case of CIF basis contract when both service provider and recipient are outside India.2. What supporting document is required for importer under RCM to claim credit of IGST paid on ocean freight.3. Availability of GST credit on office fixtures, furniture, A.C. plant, and sanitary fittings in a newly constructed building for business purposes.Analysis:1. The applicant sought an advance ruling on the applicability of IGST under Reverse Charge Mechanism on ocean freight in CIF basis contracts when both the service provider and recipient are located outside India. The Authority noted that as per relevant notifications, an importer is indeed required to pay IGST on ocean freight. Even if IGST has been paid on the CIF value of imported goods, IGST on ocean freight is still mandatory. The Authority also considered a legal application filed before the High Court but emphasized that the mere filing of an application does not invalidate a government notification unless rejected by the court.2. Regarding the supporting document for an importer under RCM to claim credit of IGST paid on ocean freight, it was clarified that credit can be availed based on the invoice or challan issued for the payment of IGST.3. The issue of GST credit availability on office fixtures, furniture, A.C. plant, and sanitary fittings in a newly constructed building for business purposes was addressed. The Authority explained that as per the CGST Act, credit is not available for land, building, or civil structures. Therefore, credit for GST paid on sanitary fittings, being integral parts of buildings, is not available. However, credit for office fixtures, furniture, and A.C. plants is permissible. This decision was supported by a CBIC Board Circular and a ruling by the CESTAT, which allowed credit for goods used in an office within a factory setting. The Authority emphasized that the credit for input tax on fixtures, furniture, and A.C. plants is admissible under the CGST/SGST Act, provided depreciation on the tax component of capital goods has not been claimed under the Income-Tax Act, 1961.