GST on Ocean Freight

[Kaustubh Karandikar]

In the case of import of goods by Sea on FOB (Free on Board), the Ocean freight is paid by the importer directly to the foreign shipping line. The ocean freight amount is separately shown in the bill of entry. Under this situation,

1) On what value GST is to be paid under reverse charge by the importer?

2) what is the percentage of GST

3) Whether to pay IGST or CGST + SGST? If the said freight is initially paid by the CHA or the freight forwarder to the foreign shipping line and then recovered from the importer, whether importer is liable to pay GST under reverse charge?

[Venkataprasad Pasupuleti]

Importer is liable to pay IGST @18% under reverse charge on the actual value of frieght paid to the foreign shipping line.

[Ganeshan Kalyani]

In case of FOB import the freight is known to the importer. IGST @5% is payable on actual freight amount. And, in case of CIF, 10% of CIF is assumed as the freight element and 5% on that part is required to be paid as IGST.

[Venkataprasad Pasupuleti]

Yes. Rate is 5%.

[Rachit Agarwal]

Ganeshanji.

Please note that the Import on CIF basis there is no liable to pay tax under reverse charge. Gujarat High Court in case of Mohit Minerals Ltd. = 2020 (1) TMI 974 - GUJARAT HIGH COURT has already held such Corigendum to Notification as ultra vires which provide for the levy of tax on deeming fiction.

[PAWAN KUMAR]

Gst is payable @5% on freight paid as fob. Gujrat high court and also Rajasthan high court stayed the levy but still taxpayers are paying under rcm and taking it.

[Ganeshan Kalyani]

It is better to pay IGST and claim input tax credit. As far as ITC is available the better option is to pay and claim ITC. No working capital impact as the claim is available in the same month. Also, Mohit Mineral case law may not be considered by the other State authority. If assesse did not paid tax then interest will be applicable.

[So B]

Dear All,

Request you all to see this video which explains the recent ruling given in case of Mohit Minerals Pvt Ltd vs. Union of India [ 2020 (1) TMI 974 - GUJARAT HIGH COURT].

[sunilkumar bhageria]

On of the panelist Mr. Pawan Kumar has referred that Rajasthan high court has also stayed the levy of RCM on Ocean freight in case of CIF. Request to him please provide the decision or any reference of the same from where we can get the same.

[YAGAY andSUN]

In our view, it is welcome judgment as Gujarat High Court clears the mist of double taxation on the Ocean Freight transaction (i.e. levying of Customs Duties including cess and IGST and also treating it as service and levying IGST again). The taxability dispute on ocean freight has been finally decided by the Gujarat High Court to hold that taxing the ocean freight is ultra vires and leads to double taxation. Further, it would be also interesting to see, how this matter will be adjudicated by Delhi High Court and Mumbai High Court, as petitions are also pending before the HCs in Delhi and Mumbai.

AI Summary

GST on ocean freight: reverse charge liability for importers, rates disputed and legal challenges create compliance uncertainty. Importers under FOB who pay ocean freight to foreign carriers are treated as liable under the reverse charge mechanism for GST on the actual freight amount; commentators diverge on the rate and prefer paying IGST and claiming input tax credit. For CIF imports the levy is disputed, with at least one high court characterising a deeming amendment as ultra vires and certain stays granted, producing jurisdictional uncertainty. Many taxpayers nonetheless pay under reverse charge to avoid interest, while litigation continues.