Question ID : 44963

Applicability of Reverse charge on Freight Forwarding Services

I seek your valuable opinion on the applicability of IGST under the Reverse Charge Mechanism (RCM) on freight forwarding transactions by GST registered entity in India, in connection with shipments between China and Middle East destinations (Overseas territory). 1. Background of the Transaction • The client provides freight forwarding services to overseas customers (90% of supply provided to one customer). • The entity is registered under GST in India and has no domestic taxable or exempt turnover apart from exports. • For its freight forwarding assignments, the client books cargo space with Chinese carriers on a principal to principal basis to execute shipments to the Middle East. • The Bill of Lading (BL)/Air Waybill (AWB) is issued showing the Chinese exporter as shipper and the Middle East customer as consignee. • Freight invoices are raised by the Chinese carriers/ agents on the Indian entity, as it books and pays for the transportation. • The client in turn raises export invoices on the Middle East customer for the full freight/logistics value (including their profit) in foreign currency and receives payment through normal banking channels. . your valuable opinion is sought for: Whether the freight forwarding transactions with overseas Chinese carriers constitute “import of services” liable to IGST or whether they fall outside GST scope, considering: 1. The transportation is performed and consumed entirely outside India (China ? Middle East route). 2. No part of the service is received or utilized in India Thanking you

unlike goods passing out and out which are exempt , services are not having an such escape route seen, two layers billing is making indian co. responsible for RCM and if RCM is setoffable one must not complicate , pay it and get it back , however still to try , one need to attempt for pure agent route, vendor to mention bill to actual party c/o indian co, and indian co will raise bill for frt recovery and service charges as seperte line items , so frt gets out of supplies and only your charges is for export of serives - getting fully exempt route - on my AI check on this it also suggested as The "Service vs. Action" Argument (The "Revenue Neutrality" Defense) If you are currently paying RCM and taking Input Tax Credit (ITC), you have a "Revenue Neutral" situation. However, if you have no domestic tax to offset, this creates a cash-flow burden. The Deep Legal Argument: You can argue that the "Nature of Work" is a "Trading of Space" rather than "Freight Forwarding." The Logic: Some legal experts argue that when you book space on a Principal-to-Principal (P2P) basis and resell it, you are performing an "Out-and-Out" service (similar to Merchant Trade). The Precedent: You can rely on the Supreme Court judgment in the case of Ocean Freight (Mohit Minerals). Although that case dealt with CIF imports, the core principle was that a person in India cannot be made to pay tax on a service where both the supplier and the underlying movement are outside the territory, especially if it leads to double taxation.