GST IMPLICATION ON OCEAN FREIGHT

❖ What is ocean freight?

Ocean freight is the term used for transporting goods internationally through ocean. It is an integral part of cross-border trade which allows movement of large quantity of goods through the open ocean. Under ocean freight, the services are drawn from third parties called freight forwarders who pick up the goods for transportation, properly arrange them to be loaded for shipping purposes, and eventually deliver those goods to the final destination.

❖ Two types of ocean freight contract: -

CIF (Cost, Insurance & freight): - In CIF contract, the seller is primarily responsible for loading the goods onto the vessel, transporting the goods from the port of origin to the destination port and also bears the cost of shipping and insurance. The buyer assumes the responsibility of the goods once they reach the destination port.

FOB (Free on Board): - Under FOB contract, the responsibility of the supplier is only till the loading of goods onto the shipping vessel at the port of origin and from there on the goods are deemed to be in the control of the buyer

❖ Taxability of Ocean Freight

Scenario

In case of Indian freight forwarder

1. Import of goods on FOB basis

Indian freight forwarder would be liable to pay tax under FCM

2. Import of goods on CIF basis

Indian freight forwarder would be liable to pay tax under FCM

In case of Foreign freight forwarder

1. Import of goods on FOB basis

Importer in India would be required to discharge GST under RCM

2. Import of goods on CIF basis

Importer in India would "NOT" be required to discharge any GST under RCM*