RCM on Ocean Freight for transport of Agri Produce

[Balakrishnan Ramalingam]

Friends,

My clients regulary import agri produce from foreign countries by vessels.

Is there any exemption available, wrt to levy of RCM on ocean freight?

Regards

R.Balakrishnan FCA

[SHARAD ANADA]

Gujarat High court has granted stay on RCM on ocean freight

2019 (5) TMI 1212 - GUJARAT HIGH COURT GHANSHYAMLAL AND COMPANY THROUGH PROPRIETOR GHANSHYAMLAL BADRILAL SOMANI VERSUS UNION OF INDIA

[Balakrishnan Ramalingam]

Thank you,

But I understand that the two stays are only to the applicants exclusive.

Hence ignoring the stays I would like to know the legal status

[KASTURI SETHI]

No exemption is available on the ground of agricultural produce. The purpose of exemption for agricultural produce is to give benefit to the farmer who is cultivator.For the purpose of import ocean freight is taxable @ 5% under RCM. Notification No.13/2017-CT(Rate) dated 28.6.17 and Notification No.8/2017-IGST (Rate) dated 28.6.17. There is double taxation. IGST @ 5% is on import of service under RCM and also IGST as part of Customs duty. Double payment of tax has been upheld by

2018 (14) G.S.T.L. 306 (A.A.R. - GST) = 2018 (6) TMI 431 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND IN RE : BAHL PAPER MILLS LTD.

[DEEPAK BANSAL]

Whether it is CIF or FOB.

[KASTURI SETHI]

It must be CIF.

[Balakrishnan Ramalingam]

It is immaterial whether it is cif or fob. Since in both cases RCM is levied.

[YAGAY and SUN]

However, you may file writ petition to seek specific relief in such matters.

[Anil Seth]

pl clarify under which clause of Notification 13/2017 dated 28.6.17 ocean freight paid is taxable under RCM.

[Anil Seth]

what is the status of Mohit Minerals P. Ltd vs UOI = 2018 (2) TMI 770 - GUJARAT HIGH COURT case on ocean freight under RCM. Pl update.

[Balakrishnan Ramalingam]

S. No. 10 of noti. 10/2017

[Balakrishnan Ramalingam]

I read somewhere coming for hearing in June along an another similar case

[DEEPAK BANSAL]

Dear Sir,

There is some issue in this notification.

1. Liability of RCM is recipientas per Sec 5(3). Importer is not recipient in this case as per Sec 2 (93) of CGST Act, as he is not making any payment for ocean freight.

2. Recipient has to make invoice as per GST per RCM supply. for this no time of supply is mention in such a situtation in Sec 12(3) of the Act.

3. Place of Supply: for every supply, Place of supply has to be determined as per Sec 10, 11, 12 or 13. But no section is prescribed where supplier and Recipient both are outside India.

AI Summary

RCM on ocean freight applies to imported services, creating potential double taxation and subject to legal challenge.
RCM on ocean freight for import of agricultural produce is treated as a taxable imported service subject to the reverse charge mechanism, attracting IGST under the notifications cited. Agricultural classification does not exempt ocean freight; tax arises under RCM whether CIF or FOB. This creates practical double taxation where IGST under RCM on the importer coincides with IGST as part of customs. Procedural issues include High Court stays limited to applicants, disputes over who is the recipient liable under RCM, and unresolved time and place of supply questions.