GST on Ocean Freight

[Kaustubh Karandikar]

XYZ imported goods by sea from Brazil. The invoice of Brazilian freight forwarder was in the name of Indian CHA and paid also by him. Subsequently, the Indian CHA issued a debit note on XYZ for recovery of these freight charges. The GST under reverse charge to be paid on the ocean freight paid to Brazilian freight forwarder is to be paid by XYZ or the Indian CHA?

[Shilpi Jain]

Without looking into the possible challenge to the RCM liability under GST on the freight charges, if we look at the RCM notification it states that the liabilty to pay tax is on the importer. In that case the person filing BoE would be liable i.e. XYZ.

[KASTURI SETHI]

CHA is only playing the role of facilitator. He is a pure agent. De facto, he is not buyer/importer. Expenses are to be borne by XYZ (importer) and not by CHA. Hence XYZ is liable to discharge tax liability on ocean freight.

[Ganeshan Kalyani]

As per notification the importer has to pay IGST under RCM. If the import term CIF then 10% of the same to be considered as ocean freight and pay GST @5% on the same. If FOB then freight is know to the importer. Gst%@5% on the freight is payable. And if the outward supply of the importer is taxable then the input tax credit of the IGST paid is eligible.

AI Summary

Reverse charge on ocean freight requires the importer to pay IGST, with GST differing under CIF or FOB terms. The GST reverse-charge liability for ocean freight is borne by the importer filing the Bill of Entry; a Customs House Agent who pays a foreign freight forwarder and recovers the amount remains a facilitator and is not the importer for GST purposes. Under CIF terms a portion of landed cost attributable to ocean freight is taxed under reverse charge, while under FOB the freight known to the importer is the taxable base. IGST paid under reverse charge is available as input tax credit if the importer's outward supplies are taxable.