2018 (9) TMI 1257 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (17) G. S. T. L. 526 (A. A. R. – GST), [2018] 59 G S.T.R. 355 (AAR) – Levy of GST on goods/services/both – applicability of Ocean freight Charges and System of double taxation with respect to import of raw materials of fertilizers – exclusion of any component of expenditure upon imported goods (Ocean freight) – scope of Section 97 of CGST/RGST Act, 2017.
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Whether in the case of import of goods on CIF (COST, INSURANCE AND FREIGHT) 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?
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Whether in the case of import of goods on FOB (Free on board) 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 c
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authority is not empowered to decide on the issue of valuation of imported goods. Therefore, this authority cannot give any findings regarding exclusion of any component of expenditure upon imported goods (Ocean freight) while determining the value of imported goods at the time of import – The question raised by the applicant is regarding the determination of valuation of imported goods at the port. The issue regarding determination of value as sought by the applicant does not fall under the purview of CGST/RGST Act, 2017 as this issue should be correctly dealt as per the relevant provisions of the Customs Act, 1962.
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Ruling:- 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 – 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
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ty. 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 bringi
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ation ). Entry 10 of the RCM SL.No. Category of Supply of Services Supplier of service Recipient of service 10. 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 the customs station of clearance in India. A person locate in non-taxable territory Importer, as define in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory. Notification is relevant to the present case. The said entry reads as follows: The importer, in terms of the Customs Act, 1962 may or may not be the service recipient. Hence, the Notification appears to be ultra-vires to the provisions of the Act. That under the service tax regime, i.e. prior to 01.07.2017, the government was empowered to notify the category of services on which tax was payable on reverse charge basis by the recipient of services or any other person. To this extent the provisions of the service tax regime differ from th
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ods in a vessel on reverse charge basis in terms of Section 5(3) of the IGST Act. Moreover, upon importation of the goods, customs duty is payable on the said goods at the time of clearance of the said goods. As per Section 7 of the IGST Act, import of goods will be considered as an inter-state supply. Hence, IGST is leviable on the same. However, as per the provisions of proviso to Section 5(1) of the IGST Act, the same is levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act ) as amended by the Taxation Laws (Amendment) Act, 2017 (hereinafter referred to as the Amendment Act ), which levies the additional duty on the goods imported into the territory of India. The relevant provisions read as follows: Section 5- Levy and Collection- Ijj*** Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Custom
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ustoms Act, 1962 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and (b) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include the tax referred to in subsection (7) or the cess referred to in sub-section (9).; On the conjoint reading of proviso to section 5 of the IGST Act and section 3(7) of the Tariff Act, it can be inferred that integrated tax shall be levied on the goods imported into India. The said integrated tax shall be in addition to the other duties of customs as specified under section 3 of the Tariff Act. As per section 3(8) of the Tariff Act the integrated tax on the imported goods shall be levied on the value of the imported article determined in accordance with section 14(1) of the Customs Act. Section 14 of the Customs
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royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf: As per section 14(1) of the Customs Act, the value of imported article shall be the transaction value . The transaction value is the price actually paid or payable for the Goods when sold for export to India for delivery, at the time and place of importation, provided that the buyer and the seller are not related and the price is the sole consideration for sale. Further, the proviso to section 14(1) states that the transaction value of the imported article, among other charges as specified, will also include cost of transportation to the place of importation. Moreover, Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter referred to as the Valuation Rules ) lays down the provisions to determine the transaction value of the imported Go
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ble 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 (Free on board) 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? 4. Personal Hearing (PH) In the matter personal hearing was given to the applicant, Mr. Sanjay Jhanwar, (Advocate) and Ms. Aditi Lodha (Advocate) of applicant appeared for personal hearing on 17.08.2018. During the PH they submitted a flowchart depicting CIF and FOB. They have also submitted a Supreme Court judgement Govind Saran Gang
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ST 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. The Entry No. 10 of the Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as the RCM Notification ) reads as under:- SL.No. Category of Supply of Services Supplier of service Recipient of service 10. 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 the customs station of clearance in India. A person located in non-taxable territory Importer, as defined in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory. Thus, as per the Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017, in the case of import of goods on CIF (COST, INSURANCE AND FREIGHT) basis, the Applicant (Importer) is liable to pay GST on the component of Ocean freight paid by
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ed that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962. From the proviso to Section 5(1) of IGST Act, 2017, it is clear that the levy and collection of IGST on imported goods would be in accordance with the provisions of the Customs Tariff Act, 1975 and value of imported goods will also be governed by the Customs Valuation (Determination of value of Imported Goods) Rules, 2007 issued under Customs Act, 1962. Hence valuation of imported goods is to be done by the Customs Authority under the Customs Act, 1962 and this authority is not empowered to decide on the issue of valuation of imported goods. Therefore, this authority cannot give any findings regarding exclusion of any component of expenditure upon imported goods (Ocean fre
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