RCM ON FREIGHT PAID FOR TRANSPORT TO NEPAL

[ROHIT GOEL]

DEAR SIR,

A manufacturer is shipping their goods from Haryana to Nepal via road. The transporter is issuing consignment note for transport service and not charging GST. My question is whether RCM is payable on such transport?

As per my understanding, as per section 13 of IGST Act, place of service is outside India but service supplier is located in India and as such it would be a Inter state supply liable to GST and thus RCM.

[Ganeshan Kalyani]

Every expert is correct here. It is like a painting hanging on the wall and each person is guessing the thing. The painter has to come forward and explain the facts.

[ROHIT GOEL]

Thank you to all esteemed experts for their valuable inputs. It appears that facts were not clear so i am stating the same hereunder:

A manufacturer has supplied goods to one of its customers in Nepal. As per agreement, price of shipment is included in price of product i.e. freight is to be borne by manufacturer. The manufacturer arranges for transport of goods via truck and transporter raises consignment note/bilty and freight is paid by manufacturer to transporter.

In my understanding, the RCM liability in such case falls upon manufacturer since he is responsible for paying freight to transporter. However since place of supply is defined to be outside India in such case, there may be issue when it comes to claim of ITC on such RCM.

The remaining is left by me to best of understanding and opinion of the panelists. Thank you.

[Amit Agrawal]

I agree with views of CA Hemanth Kumar (at Post No. 1) with regards to liability to pay tax under RCM (u/s 7 (5) (a), Place of Supply (i.e. outside India) as well as nature of tax (i.e. IGST) to be paid.

I also agree with views of Ms. Shilpi Jain (at Post No. 2) that ITC against IGST paid under RCM is available to the manufacturer-exporter of concerned goods, even when 'place of supply' is outside India.

Lastly, I believe that constitutional validity of Section 7 (5) (a) is doubtful. But, better option is to pay IGST under RCM and take ITC there-against in subject scenario under discussion.

All above are strictly personal views of mine and same must not be taken as professional advice / suggestion.

[Alkesh Jani]

Shri

As per the facts made available, my views are as under :-

First, IGST is to determine the place of supply of goods and/or service i.e. CGST + SGST is payable or IGST.

In present case, GTA services are supplied to the manufacturer, so CGST + SGST is applicable as per Section 12 (8) (a) of IGST Act, but on going through the proviso it is clear that the supply of service is to be treated as outside India and therefore, IGST is applicable. RCM is applicable and manufacture is required to pay IGST on the services. (Refer Section 7 (5) (a) of IGST Act.)

Further, service of GTA is well within the definition of input services given at Section 2 (60) of CGST Act, we can say that GTA services are used for export of goods and ITC is available.

Thanks

AI Summary

Reverse charge mechanism on international freight: exporter may owe IGST despite place of supply being outside India.
When an Indian manufacturer pays a domestic Goods Transport Agency for road carriage to Nepal and receives the consignment note, the supplier and recipient are treated as located in India so Place Of Supply rules (section 12(8) proviso) make the destination outside India and section 7(5)(a) classifies it as an inter State supply; consequently the Reverse Charge Mechanism applies and the manufacturer must discharge IGST on the GTA service, with attendant questions on Input Tax Credit recoverability and potential alternative treatment if the freight is part of a composite exported supply.