Can we pay IGST on Ocean Freight i.e. 5% in INR instaed of US$, FEMA

[AkashDeep Singh]

sir,

Can we pay IGST on Ocean Freight i.e. 5% in INR instaed of US$ ???

For Example.

Ocean Freight Amount US$ 100

IGST on Frieght i.e. 5% US$ 5

we can pay IGST on Frieght in INR, but shipping line ask IGST on Freight have to pay in US$.

please suggest.

Posts / Replies

[YAGAY andSUN]

Great question — this is a common point of confusion in import transactions involving Ocean Freight under CIF contracts (Cost, Insurance, and Freight). Let's break it down clearly:

🔹 What is IGST on Ocean Freight?

When goods are imported into India on a CIF basis, the Ocean Freight component is taxable under reverse charge mechanism (RCM). This was clarified by CBIC and upheld in several legal interpretations (though the Gujarat High Court has given a contrary judgment in Mohit Minerals which was later considered by the Supreme Court).

Even though you do not pay the freight directly to the foreign shipping line, the government wants to collect GST on this portion. Hence, you, as the importer, are deemed to be the recipient of the freight service and liable to pay IGST @ 5% under RCM.

🔹 Can IGST on Freight Be Paid in INR Instead of USD?

Yes, IGST must be paid in INR, as all tax payments under GST law in India are made in Indian Rupees. Here’s how it works:

• Freight value is converted to INR using the exchange rate notified by CBIC on the date of Bill of Entry.
• Then IGST @ 5% is calculated on that INR value.
• The IGST liability is paid in INR to the government via the GST portal under RCM.

✅ So you do NOT pay IGST in USD. It must be paid in INR through your GST account.

🔹 What if the Shipping Line Asks IGST in USD?

If the shipping line or CHA (Customs House Agent) is asking you to pay the IGST on freight in USD, that is not correct. IGST is a statutory tax obligation under Indian GST law — it is not to be paid to the shipping line but to the Indian government by you, the importer, in INR.

Shipping lines may charge freight in USD — that's fine. But IGST under RCM is your responsibility and must be paid separately to the Indian government, not the shipping line.

✅ What You Should Do:

1. Convert the USD freight to INR using CBIC’s exchange rate.
2. Calculate 5% IGST on that INR value.
3. Pay this amount under RCM using your GST portal in INR.
4. Take ITC (Input Tax Credit) of that IGST paid (if eligible).

If the shipping line is forcing IGST to be paid in USD — you can politely refuse and show that this is not aligned with GST provisions, or ask your CHA to intervene.

Disclaimer: This discussion cannot be treated at part with an legal opinion, as it is only for knowledge enrichment to understand the problem in a better manner!