ITC CLAIM ON CLEARING AND FORWARDING CHARGES IN CASE OF IMPORT

This query is : Resolved

shweta bombe (Querist)
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10 January 2025 A Ltd from India is importing materials from its holding company in Italy. The clearing and forwarding charges is paid by Holding company from Italy. In the invoice of Clearing & Forwarding gst is charged. Clearing & forwarding agent is using GST Number of A Ltd, so ITC is also reflecting in 2B. Since the since A Ltd have not paid the clearing and forwarding charges , unable to claim the ITC on that amount.
Kindly suggest if two BOEs are prepared one for clearing and forwarding charges and another for reimbursement of gst expenses whether ITC on then can be claimed ?
Or there is any other way to claim the ITC ?

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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12 August 2025 This is a practical and important GST input tax credit (ITC) query that commonly arises in import transactions involving related parties.

Let’s clarify your scenario and then provide a practical, legally compliant solution:

🧾 Scenario Summary:
A Ltd (India) is importing goods from its holding company in Italy.

Clearing & Forwarding (C&F) charges (e.g., CHA, logistics) are paid by the Italian holding company on A Ltd’s behalf.

The C&F agent in India issues GST invoice in the name of A Ltd and uses A Ltd’s GSTIN.

The GST charged on C&F invoice is reflecting in A Ltd's GSTR-2B.

But since A Ltd didn’t actually pay the C&F agent, it is uncertain whether ITC can be claimed.

✅ Key Legal Points:
✔️ Conditions for claiming ITC under Section 16(2) of the CGST Act:
To claim ITC, the recipient (A Ltd) must:

Be in possession of a tax invoice,

Have received the goods or services,

Ensure tax is paid by the supplier to the government,

Have filed returns (GSTR-3B),

Pay the value of supply + tax to the supplier within 180 days.

🔍 Issue in Your Case:
Even though A Ltd received the service (C&F) and the GST invoice is in its name and GSTIN, the payment was made by the foreign holding company directly to the CHA.

This creates a technical gap in fulfilling condition (5) above:
Payment of value + tax to the supplier by A Ltd is not made.

✅ Can ITC still be claimed?
Yes — with a compliant structure, ITC can be claimed. Here's how:

✅ Solution 1: Reimbursement with Supporting Documentation
Have two invoices raised as below:

📌 A. Invoice by Clearing Agent to A Ltd
GST invoice with proper A Ltd's name and GSTIN.

Value of service + GST charged.

This is already being done and ITC is showing in GSTR-2B.

✅ This satisfies invoice + receipt of service + tax paid + return filed.

📌 B. Reimbursement Invoice from Italian Holding Co. to A Ltd
The holding company can raise a debit note or commercial invoice to A Ltd to recover the C&F charges it paid on behalf of A Ltd.

A Ltd pays the exact amount to the holding company.

✅ Now, A Ltd is considered to have borne the expense, satisfying Section 16(2)(d) – payment to supplier within 180 days.

✅ Alternate Option: Direct Payment to CHA
If possible going forward:

A Ltd should directly pay the C&F agent (even if funds are transferred to Italy separately).

Or, A Ltd reimburses the Italian parent before 180 days, with proper documentation.

🚨 Risk if No Payment Is Made
If A Ltd does not reimburse the holding company or does not pay the CHA, then Rule 37 applies:

ITC must be reversed after 180 days from invoice date if consideration is not paid to the supplier.

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