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

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 provider and recipient are outside India. (2) Importers can claim IGST credit using invoice or challan. (3) GST credit is not available for sanitary fittings as building components, but is permissible for office fixtures, furniture, and A.C. plants, subject to specific tax depreciation conditions.

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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.

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