TMI Blog2018 (9) TMI 1257X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the service recipient in order to avoid double taxation? Held that:- The services supplied by the foreign shipping entity of transportation of goods in a vessel to a port in India is an ‘inter-state supply’ in terms of section 7 of the Integrated Goods and Services Tax Act, 2017. Hence, IGST is leviable on the same under Section 5 of the IGST Act. As per the charging section i.e. Section 5, IGST has to be paid by the taxable person - Thus, as per the Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017, in the case of import of goods on CIF (COST, INSURANCE AND FREIGHT) basis, the Applicant (Importer) is liable to pay GST on the component of Ocean freight paid by the foreign supplier to the shipping company. Valuation of imported goods is to be done by the Customs Authority under the Customs Act, 1962 and this authority is not empowered to decide on the issue of valuation of imported goods. Therefore, this authority cannot give any findings regarding exclusion of any component of expenditure upon imported goods (Ocean freight) while determining the value of imported goods at the time of import - The question raised by the applicant is regarding the determinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on CIF basis, the supplier/ exporter located in the foreign country is liable to bear the cost of transportation of goods, from the respective country upto Indian ports. Hence, for the transportation of the goods, the supplier/ exporter avails the services of a foreign shipping company, for bringing the said goods to India in a vessel. The services by the foreign shipping entity of transportation of goods in a vessel to a port in India is an inter-state supply in terms of section 7 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as IGST Act ). Hence, IGST is leviable on the same under Section 5 of the IGST Act. As per the charging section i.e. Section 5, IGST has to be paid by the taxable person. However, as per the provisions of Section 5(3), the government by notification may specify certain categories of supply of services on which tax will be paid by the recipient of the service on reverse charge basis. Hence, it is evident that the government is empowered to notify the categories of supplies/ services on which the tax shall be paid on reverse charge basis by the recipient. In exercise of the abovementioned power, the Government issued the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, customs duty is payable on the said goods at the time of clearance of the said goods. As per Section 7 of the IGST Act, import of goods will be considered as an inter-state supply. Hence, IGST is leviable on the same. However, as per the provisions of proviso to Section 5(1) of the IGST Act, the same is levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act ) as amended by the Taxation Laws (Amendment) Act, 2017 (hereinafter referred to as the Amendment Act ), which levies the additional duty on the goods imported into the territory of India. The relevant provisions read as follows: Section 5- Levy and Collection- Ijj*** Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 Section 3- Levy of additional duty equal to excise duty, sales tax, local taxes and other charges- *** (7) Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration for the sale subject to such other conditions as may be specified in the rules made in this behalf: Provided that such transaction value in the case of imported goods shall include, in addition to the price as a foresaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf: As per section 14(1) of the Customs Act, the value of imported article shall be the transaction value . The transaction value is the price actually paid or payable for the Goods when sold for export to India for delivery, at the time and place of importation, provided that the buyer and the seller are not related and the price is the sole consideration for sale. Further, the proviso to section 14(1) states that the transaction value of the imported article, among other charges as specified, will also include cost of transportation to the place of importation. Moreover, Rule 10 of the Customs Valuation (Determination of Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for Advance Ruling and the case may be decided at the earliest. The jurisdictional officer in his comments has stated that the applicant in case of import of goods on CIF basis has to pay IGST on component of Ocean Freight paid by foreign supplier to the shipping company as per Notification No. 10/2017-lntegrated Tax (Rate) dated June 28, 2017. He has further stated that for determination of value of import of goods on FOB basis, the component of Ocean freight will have to be included in the value of import of goods. 5. Findings, Analysis and Conclusion: 5.1 We find that the services supplied by the foreign shipping entity of transportation of goods in a vessel to a port in India is an inter-state supply in terms of section 7 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as IGST Act ). Hence, IGST is leviable on the same under Section 5 of the IGST Act. As per the charging section i.e. Section 5, IGST has to be paid by the taxable person. The Entry No. 10 of the Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as the RCM Notification ) reads as under:- SL.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms Valuation (Determination of value of Imported Goods) Rules, 2007 issued under Customs Act, 1962. Hence valuation of imported goods is to be done by the Customs Authority under the Customs Act, 1962 and this authority is not empowered to decide on the issue of valuation of imported goods. Therefore, this authority cannot give any findings regarding exclusion of any component of expenditure upon imported goods (Ocean freight) while determining the value of imported goods at the time of import. The question raised by the applicant is regarding the determination of valuation of imported goods at the port. The issue regarding determination of value as sought by the applicant does not fall under the purview of CGST/RGST Act, 2017 as this issue should be correctly dealt as per the relevant provisions of the Customs Act, 1962. Based on above facts along with provision of law the ruling is as follows: RULING a. The applicant is liable to pay IGST on transportation of goods by vessel under Reverse Charge Mechanism (RCM) under Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017. b. Regarding exclusion of any component of expenditure upon imported goods (Oce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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