TAKE CREDIT OF IGST PAID ON OCEAN FREIGHT UNDER CIF BASIS

[BHAKTIKANT BHATT]

SIR,

WHETHER WE TAKE IGST CREDIT ON 5% IGST PAID ON OCEAN FREIGHT PAID ON CIF PURCHASE VIDE NOTIFICATION NO 10/2017.EXCISE AUDITOR DENY TO TAKE IGST CREDIT WHICH WE PAID ON OCEAN FREIGHT.

KINDLY GIVE US YOUR VALUABLE SUGGESTION.

Thanks

[Rajagopalan Ranganathan]

Sir,

First please clarify whether ocean freight is paid in respect of imported goods or exported goods.

Vide Sl. No. 9(ii) of Notification No. 8/2017-Integrated Tax (Rate) dated 28.6.2017 as amended, in respect of transport of goods in a vessel including services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India is chargeable to IGST @ 5% subject to the condition that -credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken.

Explanation: This condition will not apply where the supplier of service is located in nontaxable territory.

If the supplier of of the service, that is the Shipping Company is located in non-taxable territory, that is in a place outside India then you have to pay the IGST @ 5% under reverse charge and you can take the credit. Please explain this position of law to your auditor and if he still persists with his objection you can seek departmental adjudication of the dispute.

 

AI Summary

IGST credit on ocean freight allowed where foreign shipping company supplies the service and reverse charge is paid. Input tax credit of IGST on ocean freight for imports hinges on supplier location: where the shipping company is located outside India, IGST on transport to the customs station is payable under reverse charge and the importer may claim input tax credit; a specified condition disallowing credit on input tax charged on goods used in supplying the service does not apply to suppliers in non taxable territory.