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?

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.