In re M/s Chambal Fertilizers And Chemicals Limited (GST AAR Rajasthan)
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 (Ocean freight) while determining their value at the time of import, the same falls beyond the purview of Section 97 of CGST/RGST Act, 2017.
FULL TEXT OF ADVANCE RULING
Note: Under Section 100 of the CGST / RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act 2017, within a period of 30 days from the date of service of this order.
The Issue raised by M/s Chambal Fertilisers & Chemicals Limited (here in after referred to as ‘Applicant’) is fit to pronounce advance ruling as it falls under ambit of the Section 97(2) (a), it is given as under:
(d) Determination of liability to pay tax on any goods or services or both.
Further, the applicant being a registered person, GSTIN is 08AAACC9762A1ZT, as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the application is ‘admitted’ to pronounce advance ruling.
1. SUBMISSION OF THE APPLICANT:
1. The applicant has sought an Advance Ruling on the applicability of Ocean freight Charges and System of double taxation with respect to import of raw materials of fertilizers.
The Applicant is engaged in the trading business of goods like DAP, MOP. The said goods are purchased from a country outside India and imported into India. The applicable rate of IGST (import as well as on sale) on DAP and MOP is 5%. The said goods are imported either on CIF (Cost Insurance and Freight) basis or on FOB (Free on Board) basis.
2. Statement of facts:-
While importing the said goods 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 Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as the “RCM Notification”). Entry 10 of the RCM
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