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RCM on Ocean Freight

In respect of imports made by sea (ocean freight), where freight amount has been paid by the supplier to the liner (both situated outside taxable territory – CIF basis), the importer in India is liable to pay IGST under RCM as per Notification No. 10/2017 IGST (Rate) dated 28/06/2017 (S. No. 10).

Relevant Section: Section 5(3) of the IGST Act 2017
Relevant Notification: Notification No. 10/2017 IGST (Rate) dated 28/06/2017 (S. No. 10)
Relevant Notification: Notification No. 8/2017 IGST(Rate) corrected vide corrigendum dated 30/06/2017

S.No.Category of Supply of ServicesSupplier of ServiceRecipient of Service
10Services 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 nontaxable territoryImporter, as defined in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory.
From: Notification No. 10/2017- Integrated Tax (Rate)

Applicability of RCM on Ocean Freight

As per Section 5(3) of the IGST Act 2017 read with notification No. 10/2017 IGST (Rate) dated 28/06/2017 (S. No. 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, the whole of integrated tax leviable under section 5 of the said Integrated Goods and Services Tax Act, shall be paid on reverse charge basis by the importer as defined under clause (26) of Section 2 of the Customs Act, 1962 of such goods.

Tax Calculation

Case I: If the freight value is available with the taxpayer, then we can take that value and calculate the IGST at 5% rate.

Case II: If the actual freight value is not available, taxpayer is liable to pay IGST on the value stipulated in notification No. 8/2017 IGST(Rate), which was corrected vide corrigendum dated 30.6.2017, that is 10% of sum of cost, insurance and freight (CIF) value of such imported goods.

So, we have to calculate 5% IGST on 10% of CIF value.

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