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2021 (3) TMI 1289 - AAAR - GSTLevy of GST - Freight on Reverse Charge Mechanism - GST has been paid on the freight in the case of indigenous supplies - GST has been paid on the ocean freight in the case of imports on the CIF value and the value of the ocean freight is included in the value of the imported goods - revenue neutrality - HELD THAT - In terms of the Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017 (as amended) in the case of import of goods on CIF basis the appellant is liable to pay GST on the component of Ocean freight paid by the foreign supplier to the shipping company. The service of transportation of goods is taxable both in case of imports as well as exports for domestic shipping line and for import for foreign shipping line. Since exports by domestic shipping line are already zero rated the ITC will not be available to Indian shipping lines if the service of inward transportation of goods is not made taxable in India. Accordingly Tax under RCM gives a level playing field to the domestic shipping lines. Moreover the goods are transported from a place outside India up-to the customs station in India for the importer and therefore he is directly or indirectly the recipient of service - the CIF value is adopted under Customs Valuation Rules for the purpose of calculation of Customs duty on Goods whereas the GST is being demanded under reverse charge mechanism only for the service portion involved in the transaction. When the GST has been paid on the freight in the case of indigenous supplies whether the supplier is required to pay again GST on the freight under RCM? - HELD THAT - The Notification No. 13/2017- CT (Rate) dated 28.06.2017 (as amended) is squarely applicable on the Appellant and they are liable to pay the GST on the freight paid under the reverse charge mechanism. As regard to the double taxation we are in unison with the Advance Ruling Authority that this is a revenue neutral exercise having no additional financial impact on the appellant and it is outside the purview of the Advance Ruling Authority.
Issues:
1. Appeal against Advance Ruling Order No. UP 63/2020 dated 10.07.2020. 2. Liability to pay GST under reverse charge mechanism on freight for indigenous supplies. 3. GST liability on ocean freight in case of imports on CIF value under RCM. Issue 1: Appeal against Advance Ruling Order The appeal was filed under Section 100 of the Central Goods and Service Tax Act and Uttar Pradesh Goods and Service Tax Act, 2017 against Advance Ruling Order No. UP 63/2020 dated 10.07.2020 issued by the Authority for Advance Ruling, Uttar Pradesh. The appellant, a registered assessee under GST, challenged the ruling given by the Advance Ruling Authority. Issue 2: Liability on Freight for Indigenous Supplies The Appellant sought clarification on whether GST needs to be paid again on the freight under reverse charge mechanism for indigenous supplies. The Advance Ruling Authority ruled that as per Notification No. 13/2017-Central Tax (Rate), the appellant is liable to pay GST on the freight under RCM. The Appellant contested this ruling citing various legal arguments, including the Hon'ble Gujarat High Court judgment. Issue 3: GST Liability on Ocean Freight for Imports Regarding the GST liability on ocean freight in case of imports on CIF value under RCM, the Appellant questioned if any further GST liability exists. The Appellate Authority upheld the ruling by the Advance Ruling Authority, stating that in the case of import of goods on CIF basis, the appellant is liable to pay GST on the ocean freight component. The Authority clarified that the service of transportation of goods by a foreign shipping entity to a port in India is an 'inter-state supply' under the IGST Act. Discussion and Finding: The Appellant's arguments were based on legal interpretations and precedents, including the judgment of the Hon'ble Gujarat High Court. The Authority analyzed each submission and found that the rulings given by the Advance Ruling Authority were valid. The Authority emphasized the importance of the Notification No. 13/2017-Central Tax (Rate) and Notification No. 10/2017- Integrated Tax (Rate) in determining the GST liability on freight for indigenous supplies and ocean freight for imports, respectively. Ruling: 1. Regarding the GST liability on freight for indigenous supplies, the ruling given by the Advance Ruling Authority was upheld, and no interference was deemed necessary. 2. As for the GST liability on ocean freight for imports on CIF value, the Authority refrained from passing any order due to the matter being sub judice before the Hon'ble Supreme Court. The Authority highlighted the pending appeal and the issuance of notices by the Supreme Court, indicating that any decision on this matter should await the Supreme Court's ruling. This summary provides a detailed analysis of the judgment, covering all the issues involved comprehensively.
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