Entitlement of Common ITC in respect of export and import airfreight

[Manoj Mahimkar]

Import Ocean Freight:

The logistic company hires services of Shipping Company for the transportation of goods on principle to principle basis. The Shipping Companies pays GST under RCM and charges the same to Logistic Company. The logistic Company further charges the same while raising the invoice upon its client. The said transaction is taxable sales with full entitlement of common ITC incurred

In the cases where the foreign shipping has raised the invoices upon the logistic Company, it does not charge GST as it does not have a place of business in India. Hence the Logistic Company pays GST under RCM and levies the same in the Sales invoice. The said the transaction is taxable sales with the full entitlement of common ITC incurred

The Logistic Company is engaged in the transportation of goods by air within India. The said transaction is liable to tax under GST with the full entitlement of common ITC incurred

Export air freight/ocean freight:

The logistic company is engaged in the transportation of goods by air/ocean from the customs station for clearance in India to a place outside India. Said transaction is exempt sales with the full entitlement of common ITC incurred

Import Air Freight:

The logistic Company is engaged in the transportation of goods by air/ocean from a place outside India to custom station for clearance in India. Said transaction is exempt sales and being so such sales would be considered as Exempt Sales for the purpose of reversal of common ITC.

As per Rule 42 of the CGST Rule 17, Definition of exempt supply bas been given in explanation inserted after Rule 43 of the CGST Rule. As per the said definition, exemption inter alia does not include transportation of goods by vessel from customs station for clearance in India to place out side India. It does mention any anything about export airfreight and import airfreight. Under such circumstance shall we consider the same exempt and entitled for full set off in respect of common ITC?

Please advise whether the observation highlighted in bold letter against each circumstance following such observation is as per the provision of GST law?

AI Summary

Input tax credit entitlement for freight: GST treatment varies for domestic taxable services, exempt exports, and ambiguous import airfreight. Logistics providers are entitled to full common input tax credit where freight is a taxable supply (including when GST is paid under reverse charge and recovered from clients). Export freight from a customs station to outside India is characterised in the note as exempt with full ITC set-off, while import freight to a customs station is characterised as exempt and triggers common ITC reversal; the note highlights that CGST Rule explanations exclude vessel carriage but are silent on airfreight, creating ambiguity on treatment.