What is the Change in GST on Ocean Freight ? from 1-Oct-2023 ? what should you do ? is there a Mix up on the social media ?
If you are a MMTO ( Multi Modal Transport Operator), a C and F, and you want to send Quotes to your customers, what do do on GST. ? Decision of GST on the old orders, already in pipeline ?
and for the normal Manufacturer / Trader / Importer ?
Query in your mind ? What to do ?
So, You have this Question ? Good.. means you are in active business
and want to do the right thing ? Legally right ? Good. Means you are at the right page
So Let us Start ? Idea ? Very good
Advantage and Disadvantage
Our Gratitude to Mr Rajesh Khandelwal for his inputs and suggestions on this post. Mr Rajesh is a CA, CPA, LLB, DISA, and a known public speaker on GST topics, in the NCR Delhi. and practising in GST guidance, GST litigations and helping the interests of the Businessmen across the Country,
What are the Advantages for the Normal Importer .. ?
You may say … Looks Great. It is exempt… blah blah .. as the media makes it sometimes… without going into the merits.
Short Answer : Double GST is gone for the Import Freight portion. from 2017 to 2023, due to the Notification 8/2017 ( details below)…. importers were being forced to pay GST on both (a) product imported on CIF value (b) Freight again on RCM… whereas Freight was included in CIF Value
read details at end of the text, if required, else continue below
Held in favour of the Taxpayers and concluded that:
The assessee is liable to pay IGST on the ‘composite supply’, comprising the supply of goods and supply of services of transportation, insurance, etc., “in a CIF contract.”
If there is a separate levy on the assessee for the supply of services’ by the shipping line, then, it would be in violation of Section 8 of the CGST Act and would amount to double taxation. Hence, there cannot be a separate levy of IGST on the component of ocean freight paid by the foreign exporter to the foreign shipping line in the CIF contract.
Therefore, in order to end the dispute on taxation on ocean freight in the CIF contract, the CBIC vide Notification Nos. 11/2023, 12/2023, 13/2023-Integrated Tax (Rate), all dated September 26, 2023 made the following changes:
Read more at: https://taxguru.in/goods-and-service-tax/changes-gst-notified-igst-ocean-freight-cif-contracts.html
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Very important
The whole focus of this case, and also the amendment was towards the double GST on the Import Freight , if already in the CIF value of the import
There is no change in the GST on the Direct Import Freight
There is no change in the GST on the Direct Sea Freight, also called Ocean Freight.. paid directly to a C & F Agent , a Shipping line, or MTO ( Multi Modal Transport Operator )
What are the Disadvantages ? Did you think about “incomplete” news coverage ? The importers are arguing with their C & F agents / Shipping lines / MTO that… Ocean Freight is now “Exempt” ?????? ….
But that is NOT CORRECT.
You must read this before you go ahead
Ocean Freight is GST exempt or not ? No Confusion. No Change except in CIF
The whole of this Supreme Court Decision & the changes in the law are pertaining to “double tax situation in CIF only”
What if, the business is IMPORTING on FOB basis, and….. He is paying to the Shipping line seperately — whether directly, or via an agent of Shipping line or to a C & F / MMTO / Freight Forwarder ?
No Change in payment of GST if Freight Forwarder is an Indian Registered entity .. and is charging GST on ocean freight, or Rail Road, IHC etc
No Change in payment of RCM if paid to outsider
Want evidence ? see this …
Source 1 : https://taxguru.in/goods-and-service-tax/amendment-implement-50th-gst-council-decisions-notification-no-11-2023.html
Source 2 : https://taxguru.in/goods-and-service-tax/changes-gst-notified-igst-ocean-freight-cif-contracts.html
Source 3 : https://taxguru.in/goods-and-service-tax/reverse-charge-mechanism-rcm-gst-provisions-notifications.html
Source 4: https://www.taxmanagementindia.com/web/View_discussions_detail.asp?ID=118780
Source 5 : https://taxguru.in/goods-and-service-tax/place-supply-provisions-gst.html
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Can you afford this Risk ?
The supply of services under RCM has been notified vide Notification No- 13/2017 Central Tax (Rate) dated 28-06-2017 as amended from time to time under Section 9(3) of the CGST Act. The list of services covered under this notification is very wide. Further, two additional supply of services has been notified for RCM under section 5(3) of IGST Act vide Notification No- 10/2017 Integrated Tax (Rate) dated 28-06-2017 as under-
Read more at: https://taxguru.in/goods-and-service-tax/reverse-charge-mechanism-rcm-gst-provisions-notifications.html
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First Serial number
Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.
to : –Any person located in a non-taxable territory
by : –Any person located in the taxable territory other than non-taxable online recipient.
So, the clauses 13(2) comes in picture
seperate clause 13(3) to 13(12) apply for specific cases.. and if a clause is removed, then it reverts back to 13(2) master clause
and this means that
Normal RCM applies in case of direct “foreign party” vendor
and Forward charge in case of Indian vendor
Read more at: https://taxguru.in/goods-and-service-tax/reverse-charge-mechanism-rcm-gst-provisions-notifications.html
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for risk reduction
So, again, Watch this area carefully… Do not jump to conclusions that are not true.
Contact us page click here
www.mlgassociates.org and www.mlgassociates.in
Ocean Freight is taxable or not ? GST ? RCM ? 1st October 2023 ?
What is the situation now ? GST or RCM on Ocean Freight Mohit Minerals case exempt or taxable
Earlier, Sl. No. 9(ii) of Notification No. 8/2017-Integrated Tax (Rate) dated June 28, 2017 (“the IGST Service Rate Notification”) provided that on the inter-state supply of services of “Transport of goods in a vessel including services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India” was leviable to Integrated Tax @5%.
Further, SI. No. 10 of Notification No. 10/2017-Integrated Tax (rate) dated June 28, 2017 (“the Reverse Charge Service Notification”) states that services supplied by a person located in non-taxable territory to a person located in non-taxable territory of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, is taxable under reverse charge basis.
Accordingly, the importer was liable to pay IGST on ocean freight paid on imported goods under the reverse charge mechanism (“RCM”) in terms of the Reverse Charge Service Notification and the IGST Service Rate Notification irrespective of the fact that ocean freight component having been part of CIF value of imported goods, on which Customs Duty including IGST was leviable.
Read more at: https://taxguru.in/goods-and-service-tax/changes-gst-notified-igst-ocean-freight-cif-contracts.html
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This leads to double taxation in the hands of the importer on the same component of ocean freight. This issue was debated and litigated in the past and had divergent rulings.
This aspect was challenged before the Gujarat High Court in Mohit Minerals Pvt. Ltd. & Ors. v. Union of India & Ors. [C/SCA/726/2018 dated January 23, 2020] wherein the High Court in a batch of petitions has declared the Sl. No. 9(ii) of the IGST Service Rate Notification and SI. No. 10 of the Reverse Charge Service Notification as ultra vires to the IGST Act, as the notifications lack legislative competence. However, the Revenue Department challenged the decision of the Hon’ble Gujarat High Court before the Hon’ble Supreme Court. The Hon’ble Supreme Court, in the case of Union of India v Mohit Minerals Pvt. Ltd. [2022 (61) G.STL 25 (SC)], held that:
Read more at: https://taxguru.in/goods-and-service-tax/changes-gst-notified-igst-ocean-freight-cif-contracts.html
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Held favourable on the following aspects: The Importer of goods will be considered the recipient as he is the ultimate beneficiary even though the shipping service is provided by the foreign shipping line to the foreign exporter in the CIF contract. The supply of services provided by the foreign shipping line to the foreign exporter in a CIF contract, would necessarily be “made” to the Indian importer who would then be considered a “recipient” under the definition of Section 2(93)(c) of the CGST Act. With regard to the validity of the said entry of the Reverse Charge Service Notification it was held that it clearly specifies a taxable person who is liable to pay a reverse charge that is envisaged in the statute. Thus, the impugned notifications in the case cannot be invalidated for an alleged failure to identify a taxable person.
Thanks again with Gratitude to Mr Rajesh Khandelwal, CA, CPA, LLB, DISA, and a public speaker on GST topics, in the NCR Delhi. and practising in GST guidance, GST litigations and helping the interests of the Businessmen across the Country.
Note 1 : These are the comments and suggestions as on 30th Sept 2023. ~ 6 pm. We will continue updating this as more information comes to our knowledge.
Note 2 : The views are for information dissemination only. And for benefit of society at large. Please contact your CA / Consultant first before taking any action on the same.
