GST payable under RCM in case of Import of Goods on Ocean Freight: AAAR [Read Order]

The Uttar Pradesh Appellate Authority of Advance ruling (AAAR) held that the GST payable under Reverse Charge mechanism in case of import of goods on Ocean freight.

The Appellant, Sangal Papers Limited is a limited company engaged in manufacturing paper out of indigenous and imported waste paper. The Appellant imports waste paper from various countries and Customs duty is paid on the same on CIF value. Once the paper is manufactured, the applicant shows the value of goods and freight separately on the invoice and pays GST on the invoice value.

The applicant has sought the advance ruling on the issue as to When GST has been paid on the freight in the case of indigenous supplies, whether the supplier is required to pay again GST on the freight under RCM. When the GST has been paid on the ocean freight in the case of imports on the CIF value and the value of the ocean freight is included in the value of the imported goods, whether any further GST liability is there under RCM.

The Authority for Advance Ruling ruled that in terms of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 (as amended) the applicant is liable to pay GST under reverse charge mechanism, on the freight paid. The applicant is liable to pay IGST on transportation of goods by vessels under Reverse Charge Mechanism (RCM) under Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017, as amended.

The applicant has challenged the AAR ruling on the grounds that no tax is leviable under the IGST Act on 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.

The coram of Ajay Dixit and Amrita Soni held that the ruling given by the Advance Ruling Authority, Uttar Pradesh is just and proper and needs no interference.The aforesaid levy is the subject matter of an appeal before the Hon’ble Supreme Court in SLP (C) Nos. 16012/2020 and 15995/2020 and the Hon’ble Apex Court has, vide order dated 06.01.2021, issued notices in the matter.

To Read the full text of the Order CLICK HERE

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