Select Your Location
The shipping industry is an essential part of global freight transportation, and it manages global trade supply-chain. More than 90% of the world trade is done through oceans because it is affordable and also an efficient mode for transporting goods. Through waterways, a large volume of goods can be carried on vessels for long distances at a cheaper rate, in comparison to other modes of transport like railways, roadways, air, etc. The Central Government has implemented service tax on ocean freight from 22 Jan 2017 and has continued similar provisions under the GST regime.
Table of Contents
freight shipping plays a significant role in the shipping of goods between
countries and continents. It offers an attractive
transportation solution. It is better to opt for ocean freight if
transportation time is not important for the transporter of goods and services.
This mode of transportation of goods is normally used to ship large and heavy
freight. Freight or commonly known as cargo is defined as goods transported for
commercial profits. The shipment of cargo/freight through the ocean or sea is
known as ocean freight shipping.
Ocean freight shipping is important for the world
economy, as it carries the bulk of international trade.
significant types of cargo which are shipped by ocean/sea include automobiles,
bulk cargo containers, break-bulk cargo and heavyweight cargo.
Ocean freight is further divided into two types
based on the destination of goods or cargo as follows:
When both the service
receiver and agent are within India, outside India, or one in India and another
outside India taxation is done as mentioned below in different scenarios:
According to entry number 19B of Notification, No 21/2019 of the CGST Act, 2017 (related to GST on Ocean freight), the services provided for transportation of goods by a ship from the customs station of clearance in India to a place located out of India is exempted from GST. This condition shall apply only up to 30th September 2020.
According to section 2(6) of IGST Act, 2017, ‘export of services’ means a supply of service where:
to Serial Number 10 of the Notification no. 10/2017 of the IGST Act, 2017, RCM
liability arises with respect to the services supplied by a person located in
non-taxable territory by way of transportation of goods by a ship from a place
out of India up to the customs station on India for clearance. The liability to
discharge GST on ocean freight, under the reverse charge mechanism is on the importer,
located in the taxable territory.
The judgment, in this case, was passed by the Honourable Gujarat High Court on 23rd January, 2020. The Honourable High court, in this case, has set aside the charges on separate integrated GST on ocean freight for import of goods made on CIF basis. It has also held that on Notification No.8/2017 – No. 9 and 10, which levies tax on the supply of service of transportation of goods by a person located in non-taxable territory to a person also in non-taxable territory from a place which is situated out of India till the customs station for clearance in India and also making the importer liable for paying such tax, are ultra-vires as per the provisions prescribed in the IGST Act, 2017.
court, after observing that IGST was already charged and received on the import
of goods on the value, including the ocean freight, the separate tax charged on
components of freight was considered as an erroneous misconception. It held
that the notifications which levied tax again as a supply of service, without
are illegal and must be struck down. Further, it also noted that the importer
in course of importing goods on CIF basis, neither took the services of
transportation of goods in a ship nor he was accountable to pay the
consideration of such service recieved, and hence the writ-applicant who is the
importer here was not the ‘recipient’ of the ‘Transportation of Goods in a
Vessel service’ under Section 2(93) of the CGST Act, 2017. It was decided here
that the importer cannot be forced to pay tax on some assumed conception that
the importer is directly or indirectly the receiver of service.
Court also had a view that the service here was neither an inter-state supply
service nor an intra-state supply service and that S. 7(5) (c) of the IGST Act does
not apply to this type of case. The complete transaction took place in a
non-taxable territory. The High Court also said that charging of tax here comes
under the scope of double taxation, which is not permitted in any statute.
Also, Read: Simplified and New GST Returns from April 2020.
Deepti is a Law graduate with an avid interest in reading and very proficient in summarizing legal cases. She has enough experience in handling legal affairs of the company. In the initial days of her career, she has worked as a legal researcher and has 3+ years of experience.
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has recommend...
The objective of the enactment of the Prevention of Money-laundering Act, 2002, i.e. PMLA (the...
Tax planning is a continuing effort and a management strategy for ensuring the minimization of...
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper o...
Are you human?: 5 + 5 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
In this article, we will discuss some important topics in relation to the GST transition process. GST is the new in...
21 Jun, 2017
Amid the expectations of an increase in goods and service tax (GST) rates and slabs to meet the revenue shortfall,...
29 Dec, 2019
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!