Question: After Mohit Minerals (Hon’ble Gujrat H.C), ocean freight liability on RCM on CIF purchases is made clean. My query is whether RCM is payable on ocean freight paid to foreign shipping co. for purchases made on FOB basis? Can one take ground that since entire activity is performed out of India, just very negligible transportation takes place within India till port, therefore, government does not have Constitutional powers to levy tax on this?
Answer: The entire liability in cross border transaction is not always decided by the place of performance. In case of transportation, it is the destination of goods which decides the place of supply (as determined by the provisions of IGST Act, 2017) and thus, if a person makes a payment for transportation of goods imported to the shipping line, such payment would be subject to GST under reverse charge in the hands of the recipient. The opinion is subject to the decision of Hon’ble Supreme Court in the case of Mohit Minerals wherein Hon’ble Gujarat High Court has held that Entry 10 of the Notification No.10 of 2017 – Integrated Tax (Rate) dated 28th June 2017 as ultra vires the IGST Act, 2017, as it lacked legislative competency.
