• Notification Date: 18-01-2022
• Notification No: N/A

GST Demands Imposed on Ocean Freight by Taxman

Several companies under the tax department are worried about the goods and service tax imposed on ocean freight. They are raising questions on this new rule of tax applicability of transportation of goods through sea routes. This matter is hanging in several courts and a decision is yet to be made.

The new ruling declared by the tax department has caused agony among several complaints and they have filed writ petitions against it.

Deoleo India, an importer of the Bombay High Court has stated in such a petition that this decision is a matter of “coercive action” taken by the department.

Several importers, along with the government and other companies have raised protests against the GST charged for ocean freight. They have approached the Supreme Court to oppose this matter. The government has protested in the past against charging IGST on ocean freight by the Gujarat High Court.

In the last month, many companies have received notice regarding this matter.

One such notice received by a company stated that the company has been importing goods from its parent company which has been detected in the audit. But ocean freight was paid by the foreign suppliers. The company was charged with 5% GST on the ocean freight.

According to the rule, the ocean freight is paid by the foreign company or seller, not by the Indian company. The foreign company makes an agreement with the shipping companies. The foreign company is liable to pay the ocean freight.

But often issues arise in acquiring ocean freight from foreign companies. So, the tax department has made this new rule to charge the Indian companies and importers with the IGST. They call it a “reverse charge mechanism”.