Importer has to Pay IGST on ocean freight : AAR

By | June 7, 2018
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(Last Updated On: June 7, 2018)

Issue : Whether under Reverse Charge Mechanism, IGST should be paid by the importer on ocean freight in case of CIF basis contract, when service provider and service recipient both are outside the territory of India.

Held : An importer is required to pay IGST on the ocean freight. Therefore as on date, even if the importer has already paid IGST on CIF value imported .goods, he is still required to pay IGST on ocean fright.

Issue : Whether credit will be available in GST of office fixtures & furniture, A.C. plant & sanitary fittings on newly constructed building on its own account for furtherance of business and accounting entry is capitalized in books of account

Held: credit of GST is available on office fixtures , furniture, A.C. plant. To further strengthen the view, the authority rely on the CBIC Board Circular No. 943/04/2011-CX dated 29th April 2011 wherein it was clarified that the goods such as furniture and stationery used in an office within the factory are goods used in the factory and are used in relation to the manufacturing business and hence the credit of the same is allowed.

AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND

Bahl Paper Mills Ltd., In re

VIPIN CHANDRA AND AMIT GUPTA, MEMBER

FINAL NO. 07/2017-18

MAY  4, 2018

Nitin Adlakha, CA for the Applicant.

RULING

1. This is an application under Sub-Section (1) of Section 97 of the CGST Act and the rules made thereunder filed by Bahl Paper Mills Ltd., 5 KM Stone, Aliganj Road, Kashipur, Uttrakhand seeking an advance ruling on the question:

(a)Whether under Reverse Charge Mechanism, IGST should be paid by the importer on ocean freight in case of CIF basis contract, when service provider and service recipient both are outside the territory of India.
(b)If point no. answer is yes, then what will be the supporting document for ‘ importer under RCM to take the credit of IGST paid on ocean freight under CIF basis contract.
(c)Whether credit will be available in GST of office fixtures 8s furniture, A.C. plant 8s sanitary fittings ‘on’ newly constructed building on its own account, for furtherance of business and accounting entry is capitalized in books of account.

2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant, on matters or on questions specified in sub section (2) of section 97 or sub section (1) of section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

3. As per the said subsection (2) of Section 97 of the CGST Act advance ruling can be sought by an applicant in respect of :

(a)Classification of any goods or services or both
(b)Applicability of a notification issued under the provisions of this Act,
(c)Determination of time and value of supply of goods or services or both,
(d)Admissibility of input tax credit of tax paid or deemed to have been paid
(e)Determination of the liability to pay tax on any goods or services or both
(f)Whether the applicant is required to be registered
(g)Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term

4. Queries raised by the applicant are covered under clause (b), (d) and (e) above. Therefore, in terms of said Section 97(2) of CGST/SGST Act, 2017, the present application is hereby admitted.

5. Accordingly opportunity of personal hearing was granted to the applicant on 2.4.2018. Shri Nitin Adlakha, C.A. appeared for personal hearing and made submissions in this regard. For A.C. Plant and furniture 85 fixtures he stated that all these goods are received by them after implementation of GST. This is not with respect of transitional provisions.

6. In the present application, applicant has requested for advance ruling on the questions mentioned at 1(a), 1(b) and 1(c) above which are discussed as under :

(a)Whether under Reverse Charge Mechanism, IGST should be paid by the importer on ocean freight in case of CIF basis contract, when service provider and service recipient both are outside the territory of India :
In this regard it is observed that vide notification no. 8/2017- Integrated Tax (Rate) dated 28.6.2017 and notification no. 10/2017- Integrated Tax’ (Rate) dated 28.6.2017 an importer is required to pay IGST on the ocean freight. Therefore as on date, even if the importer has already paid IGST on CIF value imported .goods, he is still required to pay IGST on ocean fright. Authority also observe that the applicant has also submitted a copy of Special Civil Application No. 726 of 2018 filed by Mohit Minerals (P) Ltd. before Hon’ble High Court of Gujarat in this regard. Authority observes that mere filing of an application before the Hon’ble High Court does not render a notification issued by the Central Government ultra vires until or unless the same is turned down by the competent court.
(b)supporting document for importer under, RCM to take the credit of IGST paid on ocean freight under CIF basis contract
Credit of IGST paid can be taken on the basis of invoice/challan issued
(c)Whether credit will be available in GST of office fixtures & furniture, A.C. plant & sanitary fittings on newly constructed building on its own account for furtherance of business and accounting entry is capitalized in books of account

As per explanation to the Section 17 of CGST Act, 2017 credit is not available in respect of land, building or any other civil structure……. Therefore, in view of the aforesaid provisions of law, Cenvat Credit of GST paid in relation with building or any other civil structure is not available and since sanitary fittings are integral part of building or any other civil structure, cenvat credit of GST paid on such sanitary fittings is not available. However, credit of GST is available on office fixtures 85 furniture, A.C. plant. To further strengthen the view, the authority rely on the CBIC Board Circular No. 943/04/2011-CX dated 29th April 2011 wherein it was clarified that the goods such as furniture and stationery used in an office within the factory are goods used in the factory and are used in relation to the manufacturing business and hence the credit of the same is allowed. Further the Hon’ble CESTAT, Principal Bench, New Delhi in the case of M/s Balkrishna Industries Ltd Vs CCE, Jaipur-I vide its Final Order No. A/53217-53218/2015 dated 09.10.2015 reported in 2016 (335) ELT 559 (Tri-Del) has held that the credit on duty paid on air-conditioners installed in the office of factory is admissible. Therefore the credit of input tax charged on the supply of fixtures 85 furniture and A.C. plant is admissible under CGST/SGST Act. 2017, provided that the registered person has not claimed depreciation on the tax component of the cost of the capital goods and plant and machinery under the provisions of the Income-Tax Act 1961.

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