09 September 2016
We are Freight Forwarders handling major Imports , we pay to our agents in Overseas do we have to collect the service tax for Imports 4.5% from our clients as they pay to us in India and we freight forwarders pay to our agents in overseas. If yes, then under which accounting code to be service tax filled under which category we have to update over service tax number. Experts Kindly advise. Thanking you in advance...
09 August 2024
For freight forwarders handling imports, the service tax implications depend on the specific provisions of tax law applicable in your jurisdiction. In India, as of the Goods and Services Tax (GST) regime that replaced Service Tax, the following points are relevant:
### **1. Service Tax and GST on Ocean Freight**
#### **Service Tax (Pre-GST Regime):** Under the Service Tax regime prior to July 1, 2017, the tax on ocean freight services was governed by the Finance Act. As per the rules, the recipient of the service (i.e., the importer) was liable to pay service tax under the reverse charge mechanism. The applicable rate for service tax on ocean freight was generally 4.5%.
#### **GST (Post-GST Regime):** With the introduction of GST from July 1, 2017, the taxation of freight services, including ocean freight, was integrated into the GST framework. The applicable GST rates for ocean freight services depend on the nature of the transaction: - **Integrated GST (IGST) on Import of Goods:** If the ocean freight is part of an import transaction, GST is applicable at a rate of 5% under IGST (as per Notification No. 1/2017 – Integrated Tax (Rate)).
### **2. Accounting Codes and Categories**
For the GST regime, here’s how you should handle ocean freight:
#### **Accounting Codes:** - **HSN Code for Ocean Freight:** Typically, the HSN code for freight services is 9967. For specific ocean freight services, you may need to refer to GST notification or consult with a tax advisor.
#### **GST Classification:** - **Under GST:** Ocean freight services are classified under the category "Transport of Goods by Sea" or "Transport of Goods by Ocean Freight" as per GST classification. The standard rate is 5% IGST.
### **3. Reverse Charge Mechanism (RCM):** For imports, the reverse charge mechanism applies: - As an importer, you are liable to pay GST on the ocean freight service under the reverse charge mechanism. - You need to account for this in your GST returns by reporting it in the relevant sections of your GST return forms (GSTR-1 and GSTR-3B).
### **4. Practical Steps for Compliance:**
1. **Collecting GST:** - Ensure you are aware of the tax implications for freight services from your clients. For imports, you typically charge GST at the rate of 5% under IGST.
2. **Filing GST Returns:** - Report the ocean freight charges and the GST collected from your clients in your GSTR-1 and GSTR-3B forms. - Under the reverse charge mechanism, you need to pay GST on ocean freight to the government and claim an input tax credit if applicable.
3. **Accounting Entries:** - Record the transaction of ocean freight and GST in your books of accounts as per GST regulations. - Use the appropriate HSN code for classification.
4. **Consultation:** - Since GST regulations can be complex and subject to changes, consult with a GST practitioner or tax advisor to ensure compliance with current regulations and accurate reporting.
**Summary:**
In the GST regime, you should collect GST on ocean freight services from your clients at 5% IGST. Ensure you correctly categorize and report these transactions in your GST returns. For precise guidance and compliance, always consult a tax advisor.
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