ACCOUNTING & TAXATION:
This article Covers GST on Freight Charges in Import and Export transactions i.e. Ocean Freight and Air Freight.
For our discussion Ocean freight is divided into two types based on destination of goods/Cargo namely:
-Ocean freight in respect to Imports of goods
-Ocean freight in respect to Exports of goods
Ocean freight in respect to Imports of goods:
In Ocean Freight liability to discharge GST under RCM arises wide Serial Number 10 of Notification no. 10/2017 – IGST Act, 2017, which defines ocean freight as 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.
The rate of GST needs to be discharged on the freight amount is 5% in accordance with notification 8/2017 – IGST (Rate).
The value of ocean freight would be deemed as 10% of the CIF Value, when the freight amount not known. However, if assessee have invoice or supporting to prove the Freight value included in the CIF Amount then RCM can be paid on such amount.
There are various litigations about Ocean freight on Import as IGST is already charged on the goods imported on CIF basis and again charging RCM on freight amount will have a cascading effect. Honourable Gujarat High court has made the decision in favour of the assesse and passed a judgment considering notification of RCM as Ultra vires of the Act in the case of Mohit Minerals Pvt. Ltd. However practically most of the Officers are raising demands in such cases therefore it is advisable to wait till the Supreme Court gives its judgment on it.
Ocean Freight on Exports:
As per entry number 19B of Notification No 21/2019 of CGST Act, 2017, “Services by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India” exempt from GST till 30th September 2020.
Air Freight on Import:
Wide entry no. 19 in Notification 12/2017 of Central Tax (Rate) Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India is exempt.
Air Freight on Exports:
Services by way of transportation of goods by an aircraft from customs station of clearance in India to a place outside India is exempt till 30th September 2020 As per entry number 19A of Notification No 21/2019 of CGST Act, 2017,