GST on Ocean Freight for Imports: Madhya Pradesh Advance Ruling
The Authority for Advance Ruling confirmed that importers must pay IGST on ocean freight under Reverse Charge Mechanism, even if already taxed.
- Ruling
- 05/2019 dated 02/05/2019
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- E-DP Marketing asked if ocean freight is subject to double taxation.
- The Authority ruled IGST on ocean freight under RCM is mandatory.
- This applies even if freight is included in the CIF import value.
- The Authority cannot challenge the validity of existing tax notifications.
In short
The company asked if they must pay Integrated Goods and Services Tax (IGST) on ocean freight under the Reverse Charge Mechanism (RCM) when that freight is already part of the Cost, Insurance, and Freight (CIF) value of imported goods. The Authority for Advance Ruling (AAR) decided that the tax must be paid twice because the specific government notifications require it.
What has changed
How it worked before
Many businesses assumed that paying IGST on the total CIF value at the time of import covered all tax liabilities, making a separate RCM payment on freight redundant.
What has changed
The ruling confirms that the current notification framework mandates a separate IGST payment on ocean freight under RCM. In practice, this means importers face a tax on the freight component both as part of the goods' value and as a standalone service charge.
Who this affects
Importers of goods who pay for ocean freight as part of their CIF contract price.
An example
A textile importer brings in machinery on a CIF basis and pays IGST on the total invoice value. They wonder if they can skip the RCM payment on the freight portion. Based on this ruling, the Authority would likely tell them that the RCM payment is still mandatory regardless of the CIF inclusion.
What you should do
This ruling only applies to the company that asked the question and its specific tax office. If you are in a similar position, you should consult your tax advisor to evaluate your specific import contracts and current tax exposure, as this ruling is not a law that automatically applies to your business.
If you do nothing
If you assume this ruling does not apply to you and stop paying the RCM, your local tax officer may issue a demand notice for the unpaid tax plus interest and penalties. Because this ruling confirms the government's strict interpretation of the notifications, you would likely lose a dispute on this specific point.
The terms explained
- Reverse Charge Mechanism (RCM)
- A system where the person receiving the service, rather than the person providing it, is responsible for paying the tax to the government.
- CIF value
- The total cost of imported goods including the price of the goods, insurance, and freight charges.
- Advance Ruling
- A formal decision provided by tax authorities to a business regarding how tax laws apply to their specific transaction.
The ruling in detail
Authority for Advance Ruling
E-DP MARKETING PRIVATE LIMITED
05/2019 dated 02/05/2019 · Madhya Pradesh
Questions before the authority
- Whether the Applicant/importer is again required to pay IGST on the component of ocean freight under RCM mechanism on deemed amount which will amount to double taxation of IGST on deemed component of ocean freight of the imported goods?
Facts
The applicant is engaged in the trading of edible oils and imports crude soyabean oil on a CIF basis. Under this arrangement, the ocean freight is included in the price of the imported goods paid to the foreign seller. The applicant sought a ruling on whether they are liable to pay IGST on ocean freight under the Reverse Charge Mechanism (RCM) despite it already being part of the CIF value on which IGST is paid at the time of import.
Ruling
| Question | What the authority ruled |
|---|---|
| Liability to pay IGST on ocean freight under RCM | Yes, the applicant is liable to pay IGST Irrespective of the ocean freight component being part of the CIF value |
The Authority ruled that the applicant is liable to pay IGST on ocean freight paid on imported goods under the Reverse Charge Mechanism. This liability exists irrespective of the fact that the ocean freight component is already included as part of the CIF value of the imported goods.
Reasoning
The Authority relied on Notification No. 10/2017-Integrated Tax (Rate) and Notification No. 8/2017-Integrated Tax (Rate) read with the Corrigendum dated 30.06.2017. It observed that these notifications explicitly define the taxable value of ocean freight as 10% of the CIF value for the purpose of RCM. The Authority stated it lacks jurisdiction to challenge the constitutional validity of these notifications. Consequently, it concluded that the law as laid down in the notifications is binding and mandates the payment of IGST on ocean freight under RCM.
Provisions relied on
- Section 97(2) of the CGST Act, 2017
- Notification No. 10/2017-Integrated Tax (Rate) dated 28th June, 2017
- Notification No. 8/2017-Integrated Tax (Rate) dated 28th June, 2017
- Corrigendum dated 30.06.2017
For the practitioner
This ruling confirms that the **double taxation** of ocean freight under RCM and as part of the CIF value is mandated by the current notification framework. It serves as a reminder that the Authority for Advance Ruling will not entertain challenges to the **constitutional validity** of notifications. Practitioners should advise clients that the liability to pay IGST on ocean freight under RCM remains **mandatory** regardless of the CIF valuation.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/mp-05-2019-e-dp_marketing_pvt._ltd.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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