The CBIC, in its recent circular, clarified that when the supplier of goods is a dealer and the supplier of an extended warranty is the OEM or a third party, the supplies made by different suppliers cannot be treated as part of a composite supply. Accordingly, in such cases, the supply of an extended warranty will be treated as a separate supply from the original supply of goods.
If this rationale is extended to the case of import freight (‘ocean freight’) where the terms with the foreign exporter of goods are FOB, the takeaway is that the circular entails payment of IGST on the ocean freight component since the suppliers of goods and freight services are different.
However, an argument may still be explored that the liability to discharge tax is on the importer. Composite supply can still be examined at the importer’s end, as the importer is the recipient of both the goods and the services. Hence, no separate IGST on the ocean freight services.
Let’s see…
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