Input tax credit eligible on ocean frieght paid to shipping agency

[gunda ashok kumar]

Sir,

Input tax credit eligible for export of goods on ocean frieght paid to shipping agency

[Raam Srinivasan Swaminathan Kalpathi]

POS as per provisions of Sec.12(8) of IGST Act - "Place of supply of services by way of transportation of goods including by mail or courier to (a) a registered person shall be the location of such person; Proviso to Sec.12(8) has been omitted by FA, 2023.  In my humble opinion ITC can be availed on the ocean freight paid to shipping agency subject to fulfillment of conditions in Sec.16 r.w.r.36.

[Ganeshan Kalyani]

In my view, eligible credit.

[harish varun]

When exporting goods, businesses often incur ocean freight charges paid to shipping agencies. Regarding the eligibility of Input Tax Credit (ITC) on these expenses, it's important to understand the provisions under the Goods and Services Tax (GST) regime in India.

Eligibility of Input Tax Credit on Ocean Freight:

1. Nature of Export Services: Under GST, exports are treated as 'zero-rated supplies,' meaning the tax rate on exported goods and services is zero. Exporters are allowed to claim a refund of the GST paid on inputs and input services used in the export of goods, which includes ocean freight charges.

2. Freight Forwarding Services: When exporters engage shipping agencies or freight forwarders, the GST charged on ocean freight becomes an input service. As per Section 16 of the CGST Act, ITC is available on goods and services used in the course or furtherance of business. Since ocean freight is a necessary expenditure for exporting goods, it qualifies as an input service.

3. Reverse Charge Mechanism (RCM): In cases where ocean freight services are provided by a foreign shipping line, GST is levied under the Reverse Charge Mechanism. The importer (exporter in this case) is liable to pay GST on behalf of the foreign shipping line. The tax paid under RCM is eligible for ITC, provided the exporter has complied with the tax payment and documentation requirements.

4. Documentation Requirements: To claim ITC on ocean freight, ensure proper documentation, including:

   • Invoice from the shipping agency.
   • Bill of lading or airway bill.
   • Proof of payment of GST under RCM, if applicable.
   • Export documentation like shipping bill and bill of export.

5. Filing Refund Claims: Exporters can claim a refund of the accumulated ITC by filing Form GST RFD-01. Ensure all required documents are submitted, and the claim is filed within the stipulated time frame.

Exporters are eligible to claim ITC on ocean freight paid to shipping agencies, either directly or under RCM, as it constitutes an input service necessary for the export of goods. Proper compliance with GST payment and documentation is crucial for a seamless ITC claim process.

[Shilpi Jain]

Why is there a doubt?

AI Summary

Input Tax Credit on ocean freight: exporters may claim ITC and refund subject to compliance and documentation requirements.
ITC on ocean freight paid to shipping agencies qualifies as input service for zero-rated exports and is claimable subject to Section 16 and related rules; where services are from foreign shipping lines, tax under the Reverse Charge Mechanism, once paid in compliance with law and supported by invoice, bill of lading and export documents, is eligible for ITC and may be refunded through the prescribed refund procedure.