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RCM on Ocen freight

Nrusingh Beura (55 Points)

19 May 2020

Dear member ,Is rcm applicable on ocen freight service ? please suggest.

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5 Replies

CA Saba Naaz (Chartered Accountant) (8487 Points)
Replied 19 May 2020

Yes... “With respect to services supplied by 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”, the liability to discharge GST under reverse charge would be on the importer, located in the taxable territory. However, there are some case laws regarding this issue. You may refer them.

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Nrusingh Beura (55 Points)
Replied 19 May 2020

Sir there is clearing house agency between sea liner and the importer and CHA issue invoice mention ocean freight with no tax amount..is rcm applicable in this situation ?

Pankaj Rawat (GST Practitioner) (55057 Points)
Replied 19 May 2020

CHA is like facilitator or acting as pure agent , so the liability to pay tax on RCM is of Importer who is filing BoE.

CA Akshay Hiregange (Partner - Audit & Assistance) (4825 Points)
Replied 20 May 2020

RCM not applicable based on below mentioned judgement. Although, there is an essence of double taxation prevalent (Ex: tobacco products - GST & Excise), therefore, we could expect this issue to be cleared in the Hon'ble Supreme Court.

In a recent judgement of the Gujarat High Court in a writ in case of Mohit Minerals Private Limited cited 2020-TIOL-164-HC-AHM-GST, the Gujarat High Court held that:

- IGST is not payable under reverse charge on ocean freight when goods are imported under CIF contract

- Notification No. 8/2017-IT(R) and entry no. 10 in Notification No. 10/2017-IT(R) are held ultra vires the Act and therefore, unconstitutional.

The relevant paras of the judgement are reproduced herewith for your reference:

"253. In our opinion, such observations, on the contrary, supports the case of the writ-applicants that in a case of CIF contract, the contract for transportation is entered into by the seller, i.e. the foreign exporter, and not the buyer, i.e. the importer, and the importer is not the recipient of the service of transportation of the goods.

254. In view of the aforesaid discussion, we have reached to the conclusion that no tax is leviable under the Integrated Goods and Services Tax Act, 2007, on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the customs station of clearance in India and the levy and collection of tax of such ocean freight under the impugned Notifications is not permissible in law.

255. In the result, this writ-application along with all other connected writ-applications is allowed. The impugned Notification No.8/2017 – Integrated Tax (Rate) dated 28th June

2017 and the Entry 10 of the Notification No.10/2017 – Integrated Tax (Rate) dated 28th June 2017 are declared as ultra vires the Integrated Goods and Services Tax Act, 2017, as they lack legislative competency. Both the Notifications are hereby declared to be unconstitutional. Civil Application, if any, stands disposed of."

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Pankaj Rawat (GST Practitioner) (55057 Points)
Replied 21 May 2020

Gujarat HC Judgment , in the case of Mohit Minerals , entry no. 10 of Notification no. 10 was held invalid and unconstitutional !

I partial agree that , no need to pay rcm! However still it being a jurisdictional HC, states might litagate the issue other than Gujarat state once u don't pay .