GST UPDATE ON TAXABILITY OF OCEAN FREIGHT ON EXPORT OF GOODS:-

The assessees were facing the rigours of proceedings initiated against them for non-payment of service tax on ocean freight in case of import of goods when the foreign supplier paid the freight amount to the foreign shipper directly. This is for the reason that the GST is liable to be paid by the importer under reverse charge mechanism at the GST rate of 5% on the 10% of the CIF value of imported goods by virtue of notification no. 8/2017-Integrated Tax (Rate) dated 28.06.2017 and corrigendum to the said notification. However, the problem regarding applicability of GST with respect to ocean freight pertaining to export of goods has also become a matter of concern for many exporters. In order to understand the problem, reference is made to various provisions as follows:-
As per the statutory provisions in force, it is very clear that the exporter is not liable to pay GST under reverse charge mechanism on the ocean freight incurred with respect to export of goods. In case of determining the place of supply in the case of ocean freight incurred with respect to export of goods, the provisions contained in section 13(9) of the IGST Act, 2017 plays significance which reads as follows:-
(9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.

In case of exports, the place of destination of goods is outside India so the place of supply of service is also outside India. It is submitted that since the place of supply of service is in non-taxable territory, no GST is payable by the exporter under reverse charge mechanism. Moreover, in order to pay GST under reverse charge mechanism, the location of supplier of service should be outside India, location of recipient should be in India and place of supply should be in India. However, in the present case, place of supply itself is outside India and so no GST is payable.

It is also pertinent to mention that that the Notification No. 09/2018-Integrated Tax (Rate) dated 25.01.2018 grants exemption to the services by way of transportation of goods by a vessel from a customs station of clearance in India to a place outside India. Similar exemption was granted in CGST also. However, this exemption is being taken as a tool to recover GST on ocean freight incurred for export of goods by the revenue authorities on the contention that the exemption was granted w.e.f. 25.01.2018 and prior to 25.01.2018, said services were leviable to GST. Although, the position of law is very clear but still, an adverse interpretation is being taken by the revenue authorities to levy GST on ocean freight paid on export of goods. It is truly said that sometimes activities done with good intention turn unfavourable.

This is solely for the educational purpose.
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GST UPDATE ON TAXABILITY OF OCEAN FREIGHT ON EXPORT OF GOODS:-

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GST UPDATE ON TAXABILITY OF OCEAN FREIGHT ON EXPORT OF GOODS:-

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