Tax Management India. Com
                            Law and Practice: A Digital eBook ...
TMI - Tax Management India. Com
Case Laws Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Manuals SMS News Articles Highlights
        Home        
 
Extracts
Home List
← Previous Next →

Service Tax and GST onOcean Freight

Service Tax - Started By: - Prashant Gupta - Dated:- 14-3-2018 Last Replied Date:- 18-6-2018 - Sir Recently in my final audit of Excise and Service Tax for pre GST era, I was taxed for Ocean Freight for the period 23rd April 2017 to 30th Juna 2017. I was aware of notification of 1/2017 & 2/2017 of Service Tax Act but was not aware of notification no 16/2017 which transfers the liability on the Importer. Not GST is also payable on it on RCM. I just want to ask that don't you think that th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or else if freight is not known then you have to pay service tax @1.40% + Sbc and kkc of CIF value. The same is taxable in GST also @5% on 10% of CIF value. - Reply By Prashant Gupta - The Reply = @CS Sanjay MalhotraSir with you due respect don't you think that this is double taxationOnce you pay custom duty as well as GST on CIF valueThen again you are paying GST on F value - Reply By rajkumar shukla - The Reply = A valid point has been raised by you. However this is continuing since servi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

can never be treated as Double Taxation. Consider case of domestic supply of Goods, wherein in case of FOR price GST is paid on value of goods which is inclusive of freight.Furthermore, you pay tax under RCM also on the same freight amount if services taken from transporter. It's actually the transporter liability and the burden to pay has been shifted on recipient as highlighted by Sh. Shukla ji. The issue of non taxability of ocean freight has already been challenged in High Court as tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

CGST Act, 2017 where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. I invite opinion of the experts of this forum. - Reply By rajk .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ght. Earlier GST on Ocean Freight was 5% & Air Freight was 18% Now enjoy CIF , CFR Shipment without GST . While in case of FOB Shipments the question of GST on Freight does doesn't arise. - Reply By Prashant Gupta - The Reply = @Kishan BaraiWhat is the status for importers importing the material on CIF basis - Reply By Kishan Barai - The Reply = For Importers GST on Freight has to be paid. - Reply By Ankit Bansal - The Reply = In this case, writ petition has been filled before Hon'bl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

misplaced - APRIL 24, 2018 - By K K Sharma, Member, Central Board of Excise & Customs (Retd.) - THERE is a widespread perception among importers and tax professionals that the iGST Act, 2017 ( iGSTA , in short) subjects ocean freight, paid on the importation of goods, to double incidence of iGST, in terms of two distinct notifications, both issued u/s 5(1) of that Act. In fact, it has now become a burning issue with at least one of them having already knocked at the door of Hon'ble Guja .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ated 28.6.2017 which fixes the iGST rates on services including, as indicated against Sl. No. 9(ii) of the table appended to that notification, on 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. 2. Notably, notification No. 8/2017-IT(R) unambiguously r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nter-state trade or commerce, and is subject to iGST u/s5(1) ibid. The iGST on goods is payable, in terms of the proviso to S.5(1) of the iGSTA read with S. 3(7) of CTA, on the value determined u/s 3(8) of CTA. Similarly, the iGST on imported services is payable on their transaction value, in the instant case freight charges, as contemplated u/s15 of cGSTA read with S.20(iii) of iGSTA. 4. The liability to pay iGST on the imported goods falls on the importer u/s12 &S.47(1) of the CA read with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me service (ocean freight), in the manner elaborated above, amounts to double taxation. Is this argument valid? Is the freight paid on the imported goods indeed subject to double GST levy? These questions naturally throw up following three issues for consideration and determination- A. What is the nature of supply involved here? B. How is this supply taxable under GST law? C. Is it indeed subject to double taxation? But before analyzing and answering these questions, let us understand the meanin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

insurance and freight - the importer himself or the overseas supplier - the price payable by the importer to the supplier is denoted, in international commercial terms, by the acronym FOB or CIF, where FOB stands for free on board and CIF for the sum of cost, insurance and freight. 7. The FOB price indicated in overseas supplier's invoice (generally followed by the name of the load port or port of export, e.g. FOB - Hongkong) implies that the price payable by the buyer/importer to the overs .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eva, means that the overseas supplier has also paid for both the insurance and freight up to the destination port and is thus entitled to collect from the importer full price of the goods payable for taking the goods to such port. This price equals the FOB price (payable up to the load port) plus freight and insurance from the load port to the destination port. The letter C , representing cost in the CIF price, is nothing but the FOB price. (Conventionally, all international commercial terms suc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

volved, he becomes the direct recipient/importer of the service of transportation of goods in a vessel. A recipient of supply of goods or services or both, according to S.2(93) of cGSTA read with S.20(i) of iGSTA, means (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration . Accordingly, he would be liable to pay iGST u/s 5(1) of iGSTA, both on the FOB value of imported goods as well as the service (freight). In a CIF .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s and charges necessary for importing those goods into India. In case of an FOB price, such cost and charges may be attributable to loading of those goods from the supplier's warehouse on to a motor vehicle; transportation from the warehouse to the load port; unloading at the port; and various port services including that required to load the goods on to the vessel. In case of CIF transaction, the services may additionally include freight and insurance payable for transporting those goods fr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ht, of which goods constitute the principal supply. Such a supply, consisting of two or more taxable supplies of goods and services, is undoubtedly naturally bundled and is made in conjunction with each other. Is it not, therefore, a composite supply, as defined and illustrated u/s 2(30) of cGSTA? (30) composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to be kept in mind that: (a) S.2(107) of cGST Adefines taxable person as a person who is registered or liable to be registered u/section 22 or section 24 ibid; (b) a recipient of supply, required to pay tax under reverse charge, is indeed liable to be registered u/s.24(iii)ibid; and (c) as noted earlier in para 4 supra, an importer of goods or services or both is indeed liable to pay tax under reverse charge. For the purposes of S. 2(30) of cGSTA, therefore, an importer is indeed a taxable perso .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

toms Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be thetransaction value of such goods , that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole con .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he manner specified in the rules made in this behalf: (emphasis supplied) 15. It is also notable that the composite nature of supply of imported goods does not change under the CA even where the supply received is FOB value-based; the importer himself directly receives the service; and pays the ocean freight directly to the shipping line. When it comes to levy of duties of Customs, including iGST, in accordance with the provisions of S.12 CA read with S.3(7) of CTA, the transaction value of good .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

de India into India is an element of a composite supply, of which imported goods constitute principal supply, its taxability has to be determined in terms of S. 8 of cGSTA read with S.20(ii) of iGSTA. The said S. 8 reads as under: 8. The tax liability of a composite supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply shall be treated as a supply of such principal supply. (emphasis supplied) 18. Cl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

will be a clear violation of the provisions of S.8 cGSTA. C. Double Taxation 19. We have already seen that: (i) the two notifications, referred to in para 1 supra, prescribe the rates at which various goods and services classified thereunder are to be taxed u/s. 5 of iGSTA; (ii) Notification No. 10/2017-IT(R) specifies the services in respect of which tax is payable by the recipient under reverse charge; and (iii) a composite supply of goods or services or both is taxable at a rate applicable to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is notified in Notification No. 10/2017-IT(R)? The answer to my mind is NO. And it is inter alia for following reasons: - (a) S.5(1) of iGSTA provides for a levy of iGST on the inter-State supplies only of goods or services orboth (composite or mixed supply). It does not permit levy of such tax on goods or services and both, for that would indeed amount to double taxation; (b) the supplier has made a supply of both goods and service which is unambiguously a composite supply, as defined and illu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

well u/s20(ii) ibid. Consequently, any naturally bundled supply of goods and services, comprising a composite supply, can be taxed only in the manner prescribed in S.8 of cGSTA and in no other manner. Splitting and taxing such a bundled supply of goods and ocean freight separately would make the provisions of S.8 otiose. 21. Thus, where an individual supply of goods or services has been taxed as an element of composite supply, it can't be taxed again as goods or service separately. It is tr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r, as defined in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory . And the S.2(26) defines an importer , in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes 19 [any owner, beneficial owner] or any person holding himself out to be the importer. (emphasis supplied). Clearly, the importer made liable to pay iGST under reverse charge in terms of the notification 10/2017-IT(R) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1962. And u/s12 of the CA, duties of Customs are collected at the time when the goods are cleared for home consumption u/s 47 ibid. The iGST is to be levied and collected along with other duties of Customs in accordance with the provisions of sub-sections (7) & (8) of S.3 of CTA which are reproduced below: (7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent. as is leviable u/section 5 of the Integrated Goods .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.