GST on Ocean Freight in India (2024): What Every Business Needs to Know—Without the Legal Jargon

If you’re in the business of importing or exporting goods by sea, you know ocean freight isn’t just about moving containers—it’s about navigating a maze of GST rules that seem to change every year. Whether you’re a manufacturer in Chennai, a logistics provider in Mumbai, or a small exporter in Surat, here’s a straightforward, no-nonsense look at how GST affects your ocean freight bills in 2024.

Why Is Ocean Freight Such a Big Deal for GST?

More than 90% of India’s international trade relies on ocean freight. But when it comes to GST, who pays, how much, and when can get confusing—especially with all the recent amendments and court cases.

2024 GST Rates for Ocean Freight: The Basics

Exports (Outbound):

• 5% GST (no ITC allowed) or 18% GST (ITC allowed)

Imports (Inbound):

• 0% (Exempt) after October 2023

What changed in 2023?

The Supreme Court’s Mohit Minerals verdict and new CBIC notifications mean importers are no longer double-taxed on ocean freight. For most import contracts, IGST on freight is now exempt.

CIF vs. FOB: Who Actually Pays GST?

CIF (Cost, Insurance, Freight): The seller arranges shipping and includes freight in the invoice.

Old Rule: Importers paid IGST twice—once on goods (CIF value) and again on the freight component (RCM).

Now: After the Supreme Court’s Mohit Minerals case, no GST is charged on ocean freight for CIF imports.

FOB (Free on Board):

The buyer arranges shipping and pays the freight provider directly.

GST Impact: If you hire a foreign shipping line, you might still need to pay GST under RCM, but most Indian importers now avoid this by hiring domestic lines or using CIF. sxSGST on Exports: What’s Changed? Before Oct 2022: No GST on outbound freight. After Oct 2022: GST applies—choose 5% (no ITC) or 18% (with ITC). Place of Supply: For registered businesses, it’s the recipient’s location; for unregistered, it’s where goods are handed over.

Case in Action:

A textile exporter in Surat shipping to Germany on FOB terms pays 18% GST on freight but claims ITC, reducing their overall tax burden.

Refund Headaches: CIF vs. FOB Values Exporters often get stuck when their shipping bill (FOB value) doesn’t match their GST invoice (CIF value). This can delay GST refunds.

What to do:

• Use CIF value for GST invoices and FOB value for shipping bills.
• If refunds are delayed, refer to CBIC Circular No. 125/44/2019-GST and seek clarification.

5 Practical Tips for Hassle-Free Compliance

1. Prefer FOB for Imports: Avoid RCM by letting the seller arrange shipping.
2. Opt for 18% GST on Exports: If you want to claim ITC, this is the way.
3. Keep Your Paperwork Tight: Save all contracts, invoices, and CBIC notifications.
4. Check for Refunds: If you paid RCM on ocean freight in the past, you might be eligible for a refund post-Mohit Minerals.
5. Stay Updated: The GST Council is known for surprise amendments—don’t get caught off guard.

Recent Legal & Policy Updates

• Mohit Minerals Case (2022): Supreme Court ruled GST on CIF freight unconstitutional.
• CBIC Notification 12/2023: IGST on import ocean freight now exempt.
• CBIC Notification 13/2023: RCM on foreign shipping lines removed.
• E-invoicing Alert: From April 2025, logistics firms with ₹5 crore+ turnover must implement e-invoicing.
• Looking Ahead: What’s Next for Ocean Freight GST?

The GST Council may revisit export freight exemptions in 2025.

• E-invoicing will soon be mandatory for more logistics companies.
• Legal clarity is improving, but always double-check with your CA or tax advisor.

Final Thoughts

GST on ocean freight doesn’t have to be a nightmare. With the right paperwork, a basic understanding of CIF/FOB, and attention to the latest rules, you can keep your business compliant and avoid nasty surprises at customs.