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2019 (2) TMI 1741 - AAR - GSTWhether the transaction is import of service or not and it is inter-state supply or not? - HELD THAT - The Section 7 of IGST Act determines whether a transaction is an Inter-state supply or an Intra-state Supply. Sub-section 4 of Section 7 of IGST Act states the supply of services imported into India shall be treated as Inter-state supply. Clause (c) of sub-section 5 of Section 7 of IGST Act states that supply of goods or services or both in the taxable territory, not being an intra-State supply and not covered elsewhere in this section shall be inter-state supply. Therefore, the said transaction qualifies as import of service and it is inter-state supply. Whether the applicant can be deemed as the recipient of the service or not? - HELD THAT - As per sub-section 3 to Section 5 of IGST Act read with sub-section 1 of Section 5 of IGST Act, on inter-state supply of goods or services, by way of notification the Government may notify specific category of services where the recipient of service will be considered as the person liable to pay tax - In the present case, the service of transport by vessel is for the goods imported by the applicant. The consideration for both goods and also for service i.e. transport of the same by vessel, is paid by the applicant. The applicant's view that they are paying only for goods and not for transport of the same is incorrect as the said consideration paid for the transaction is inclusive of freight also. Therefore, the applicant is the recipient of both goods and services. Whether the applicant is liable to pay tax on the transaction referred under reverse charge mechanism or not? - HELD THAT - An importer is required to pay IGST on the ocean freight in terms of Notification No. 10/2017-Integrated Tax (Rate), dated 28-6-2017 read with Notification No. 8/2017-Integrated Tax (Rate), dated 28-6-2017. There is no exemption available under the GST provisions for payment of IGST on ocean freight where IGST is paid on the goods imported.
Issues involved:
1. Whether ocean freight is leviable to GST as a supply of service? 2. Whether the transaction qualifies as an import of service? 3. Whether the transaction qualifies as an inter-state supply? 4. Whether the applicant can be deemed as the recipient of the service? 5. Whether the applicant is liable to pay tax under the reverse charge mechanism? 6. Whether the levy of IGST on ocean freight amounts to double taxation? 7. Whether the exclusion of subsidy value and levy of IGST on ocean freight lead to the accumulation of credit against the spirit of GST law? Analysis: 1. Ocean Freight and GST: The Authority determined that ocean freight is leviable to IGST as an inter-state supply of service. The Applicant, as the importer, is liable to pay IGST under the reverse charge mechanism as per relevant notifications. 2. Import of Service and Inter-state Supply: The transaction involving the transportation of goods in a vessel from a non-taxable territory to a taxable territory qualifies as an import of service and an inter-state supply under the IGST Act. 3. Recipient of Service: The Applicant is considered the recipient of both goods and services as the consideration paid for the transaction is inclusive of freight charges. Therefore, the Applicant is liable to pay tax on the transaction. 4. Reverse Charge Mechanism: The Applicant is liable to pay tax under the reverse charge mechanism prescribed by Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017, regardless of the valuation method adopted for the import of goods. 5. Double Taxation and Accumulation of Credit: The issues of double taxation, subsidies, and the cascading effect leading to the accumulation of credit were deemed beyond the purview of Section 97 of the CGST / APGST Act, 2017. In conclusion, the Authority ruled that the transportation of goods in a vessel from a non-taxable territory to a taxable territory constitutes an import of service, and the Applicant is liable to pay IGST on the ocean freight under the reverse charge mechanism. The issues of double taxation and credit accumulation were considered outside the scope of the GST law.
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