As one of the popular topics, so to say, the levy of GST on ocean freight has all along been a point of discussions and litigations at the time of export and more contentious at the time of import of Goods.
The CBIC vide it’s Notification number: 02/2018 (C-Rate) IGST, dt 25/01/2018 granted complete exemption from IGST liability, in terms of powers vested under Section 11 of CGST Act 2017 for out bound international freight with a sunset clause upto 30 September 2018.
It was extended time and again and finally further extended till 30th September 2022 vide Notification No. 07/2021 (R)-IGST rate till 30/09/2022 wherein followings services were covered:-
(a) supply of service of transportation of goods by air from a place in India to a place outside India
(b) supply of service by way of transportation of goods by a vessel from a place in India to a place outside India.
Now, consequent upon expiry of the validity of the said exemption notification which came with the sunset clause as on 30/09/2022 the following supplies have become taxable with effect from 01st October 2022 and would be subjected to levy of GST as no further extension of exemption has been notified:-
(a) Ocean export freight billed to a person in India to be charged at 5%
(b) Air export freight billed to a person in India to be charged at 18%
Apart from this it is also pertinent to note that in cases of outbound shipments whether by air or by sea or by any other means where both the parties are in India i.e., location of supplier and the location of recipient are in India, then the place of supply shall be determined in terms of Section 12(8)(c) of IGST Act 2017.
The new proviso to Section 12(8) has been inserted with effect 01/02/2019 which states that
Provided that where transportation of goods is to a place outside India the place of supply shall be the destination of such goods.
This is subject to levy in terms of Section 7(5) of the IGST Act 2017 as Inter-State transactions.
Now therefore, as per proviso to section 12(8)(c) read with section 7(5)(c) of the IGST Act 2017, these supplies will be subjected to IGST with place of supply as outside territory and levy as Inter-State transactions.
To sum up it may be very important to note that in an event where no further extension is granted to the above exemptions then IGST shall be levied on all outbound freight transactions when the provider of service bills it to a person in India and the IGST on ocean freight is at 5% and air freight is 18% is payable. Till the exemption notification is issued, exporters should pay accordingly, however can claim ITC of the same.
Well……
No benevolence beyond a point, not sure.
Author Bio
As per Notification No. 8/2017-Integrated Tax (Rat should be levied at 18% on Ocean freight on export of goods. dated 28 june 2017 under heading 9965 (v) Goods transport services other than (i), (ii), (iii) and (iv) the rate of GST is mentioned as 18% .Hence in my opinion GST should be levied at 18% on Ocean freight on export of goods.
When Air Freight at 18% and Sea Freight at 5% is levied, when exporter exporting under C& F terms can they claim their GST input in the export declaration (shipping bill) post payment of GST. If yes, the Exporter will be paying the GST against the service providers invoice, then how come he can claim the same under the Shipping bill for the same transaction will it not be dual claim on the same transaction.
Is GST applicable on ocean freight for USD Invoices raised by Indian Freight Forwarder Company to Foreign Shipping Company? If yes, what is the percentage chargeable
if the place of billing is in state, in case of purchase or sales how can we take igst on state customer.
Notification 7/2021 IGST (RATE) may not be relevant to the topic on levy of IGST on outbound Ocean freight to the Supplier of services.
Apt information and inputs at right point of time Dr Srivatsan.
Is GST applicable on ocean freight for USD Invoices raised by Indian Company to Foreign Company?
If yes, what is the percentage chargeable
I presume it is Export Ocean Freight, at the outset it looks like it is an export of services (if all the 5 conditions attached to Export of services are satisfied) but the fact that the language used in the notification is “Services by way of transportation of goods by an aircraft / vessel from a place outside India upto the customs station of clearance in India”. With the given words there is an anamoly created whether even Invoicing Ocean export freight to Foreign entity will suffer GST overriding the provisions of GST. One need to wait for clarification . This further makes it complicated if margins are added to the Freight and invoiced outside india.