QUESTION

In case of Import ABC deal with the Forwarding Agent (Forwarder) and Clearing House Agent (CHA) only. The forwarder's responsibility is to bring the goods to the port from where CHA clears the goods. The forwarder appoints the shipping line to bring the goods to port. The forwarder charges such amount paid by him to the shipping line in its invoice showing clearly Ocean freight (both in foreign currency as well as INR) on which 5% GST is charged to us and 18% GST on other services provided by him. ABC is paying the GST both on Ocean freight as well as on other services and availing the ITC. Since ABC is directly dealing with the Forwarder and not in direct contact with the Shipping line. Whether there is any GST liability on account of Ocean freight on Reverse Charge Mechanism basis since ABC is paying GST in Forward Charge mechanism on Forwarder's bill.

ANSWER
 

Facts of the case: ABC is directly dealing with the Forwarding Agent (Forwarder) and Clearing House Agent (CHA) only. The forwarder`s responsibility is to bring the goods to the port from where CHA clears the goods. The forwarder appoints the shipping line to bring the goods to our port. The forwarder charges such amount paid by him to the shipping line in its invoice showing clearly Ocean freight (both in foreign currency as well as INR) on which 5% GST is charged to us and 18% GST on other services provided by him. Whether there is any GST liability on account of Ocean freight on Reverse Charge Mechanism basis since ABC is paying GST on Forward Charge mechanism on Forwarder`s bill.

Reply: Since the forwarder is dealing with the shipping company and paying tax himself, therefore, ABC need not pay tax again to the shipping company. ABC is paying tax on the services of the forwarder which includes the freight amount.

We take this opportunity to update that even if some services are covered under RCM but the supplier decided to charge tax on the invoice in that case the receiver is not liable to recharge it again.

The same decision is given by High Court of Gujarat in case of Mohit Minerals Pvt. Ltd. v/s Union of India [2020(01)LCX0127]. (Reply dt. 22/03/2021)