IGST is payable on ‘ocean freight’, but determination of value of imported goods is outside the scope of advance ruling: AAR

Categories: Advance Ruling
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Facts: M/s Chambal Fertilisers & Chemical s Limited 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 OAP and MOP is 5%. The said goods are imported either on CIF (Cost Insurance and Freight) basis or on FOB (Free on Board) basis. 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 IGST Act, 2017. Hence, IGST is leviable on the same under Section 5 of the IGST Act which has to be paid by the taxable person. But vide Notification No. 10/2017 – Integrated Tax (rate) dated June 28, 2017, the importer is deemed as a recipient liable to pay GST under reverse charge in case of services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to customs station of clearance in India.


A) Whether in the case of import of goods on CIF basis, the Applicant (Importer) is liable to pay GST on the component of Ocean freight paid by the foreign supplier to the shipping company, as consideration for availing the service of transportation  of  goods  by  sea  provided  by  the  foreign  shipping entity?

B) Whether in the case of import of goods on FOB basis, the Applicant (Importer), for the purpose of determination of value of goods for the payment of IGST on import of goods is required to exclude the value of the component of Ocean freight paid by the Applicant (importer) to the foreign shipping entity, on which already GST is paid by the Applicant (importer) being the service recipient in order to avoid double taxation?

Held: The Hon’ble AAR, Rajasthan vide Advance Ruling No. RAJ/AAR/2018-19/14 dated August 25, 2018 held as under:

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 June 28, 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.

Citation: [TS-475-AAR-2018-NT]