RCM IGST Entry 1: Import of Services, and the Ocean Freight Entry That Was Struck Down

RCM IGST Entry 1 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

The IGST reverse charge notification has one entry that catches almost everything, and one that was litigated to the Supreme Court and then deleted. Both are worth knowing — the first because it applies to every business that buys anything from abroad, the second because it is the clearest illustration in GST of a limit on the reverse charge power.

Entry 1 of Notification No. 10/2017-Integrated Tax (Rate) covers "any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient" — the recipient in the taxable territory pays IGST. The definition of "non-taxable online recipient" in section 2(16) of the IGST Act was substituted by the Finance Act, 2023 w.e.f. 01.10.2023 to mean any unregistered person receiving OIDAR services in the taxable territory. Entry 10, which taxed ocean freight on CIF imports in the importer's hands, was omitted w.e.f. 01.10.2023 following Union of India v. Mohit Minerals Pvt. Ltd.

Entry 1: how wide it is

Note that the description is "any service". There is no list. Every service imported into India — software subscriptions, professional advice, cloud infrastructure, group management charges, licence fees, marketing services — is inside this entry unless it is exempt.

And the tax is IGST, because supply of services imported into India is treated as a supply in the course of inter-State trade or commerce.

The exclusion of the "non-taxable online recipient" is what makes the entry work. An unregistered individual buying an OIDAR service cannot practically be made to self-assess IGST; so that population is carved out of Entry 1 and dealt with instead by making the overseas OIDAR supplier register and pay under section 14 of the IGST Act.

The definition that changed on 1 October 2023

Section 2(16) as it now stands, substituted by section 160(a) of the Finance Act, 2023 read with Notification No. 28/2023-Central Tax dated 31.07.2023, w.e.f. 01.10.2023:

"non-taxable online recipient" means any unregistered person receiving online information and database access or retrieval services located in taxable territory. Explanation — "unregistered person" includes a person registered solely in terms of clause (vi) of section 24 of the CGST Act.

The old definition, up to 30.09.2023, was far narrower: any Government, local authority, governmental authority, individual or other person not registered and receiving OIDAR services for any purpose other than commerce, industry or any other business or profession, located in the taxable territory.

What the substitution did. It removed the "non-business purpose" condition. The Handbook explains the object: "This adjustment aims to facilitate the taxation of OIDAR service provided by any person located in non-taxable territory to an unregistered person receiving the said services and located in the taxable territory."

And the Explanation closes a gap. A person registered solely under section 24(vi) — that is, a person required to deduct tax under section 51, whether or not separately registered — is treated as unregistered for this clause. So a TDS-only registrant buying OIDAR services is a non-taxable online recipient, and the overseas supplier bears the obligation.

The OIDAR definition was widened at the same time. Section 2(17) was amended by section 160(b) of the Finance Act, 2023 with the same notification and date, omitting the words "essentially automated and involving minimal human intervention and". That deletion materially widens the category: a service is now OIDAR if its delivery is mediated by information technology over the internet or an electronic network and its supply is impossible to ensure without information technology — the degree of human involvement no longer matters.

The inclusive list remains: advertising on the internet; providing cloud services; provision of e-books, movie, music, software and other intangibles through telecommunication networks or the internet; providing data or information, retrievable or otherwise, in electronic form through a computer network; online supplies of digital content; digital data storage; and online gaming, excluding online money gaming as defined in section 2(80B) of the CGST Act (substituted by the IGST (Amendment) Act, 2023 w.e.f. 01.10.2023).

A related return change. Notification No. 38/2023-Central Tax dated 04.08.2023, on the 50th Council's recommendation, amended rule 64 and Form GSTR-5A so that a person providing online money gaming from outside India to a person in India, or OIDAR services from outside India to a non-taxable online recipient or to a registered person other than a non-taxable online recipient, files GSTR-5A by the 20th of the succeeding month.

Entry 10: the ocean freight levy, and why it ended

The entry as it stood before omission: services supplied by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, the recipient being the importer as defined in section 2(26) of the Customs Act, 1962, located in the taxable territory.

How the levy was constructed. Where either the supplier or the recipient is outside India, section 13 of the IGST Act fixes the place of supply, and section 13(9) then provided that the place of supply of transportation of goods, other than by mail or courier, is the place of destination of the goods — India, on an import. Entry 9(ii) of Notification No. 8/2017-Integrated Tax (Rate) prescribed 5% for transport of goods by vessel, including services "provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory" from outside India up to the customs station. And a corrigendum dated 30.06.2017 provided that where the value of that service is not available with the person liable to pay, it is deemed to be 10% of the CIF value.

The result: an importer paid IGST at 5% on 10% of the CIF value, on a freight service invoiced by a foreign shipping line to a foreign exporter, with no Indian involvement at all.

Mohit Minerals. A writ before the Gujarat High Court (2020-VIL-36-GUJ, 23.01.2020) struck the notifications down. The Union appealed, and in Union of India & Anr. v. Mohit Minerals Pvt. Ltd., Civil Appeal No. 1390 of 2022, decided 19.05.2022 [2022 (61) G.S.T.L. 257 (S.C.)], the Supreme Court held against the levy. The Handbook records the reasoning:

• In a CIF contract, once ocean freight is paid by the foreign seller to the foreign shipping line, the importer cannot be subjected to RCM.
• On a conjoint reading of sections 2(11) and 13(9) of the IGST Act with section 2(93) of the CGST Act, import of goods by a CIF contract constitutes an inter-State supply on which IGST is payable, and the importer would be the recipient of the shipping service.
• Specifying the recipient by notification is only clarificatory — the Government did not, and could not by notification, specify a taxable person different from the recipient prescribed in section 5(3). In a CIF contract, the person liable to pay the consideration is the foreign supplier; the Indian importer is not the recipient.
• Decisively: the Indian importer already pays IGST on the composite supply of goods including transportation and insurance. A separate levy on the service leg violates section 2(30) read with section 8 of the CGST Act.

The consequential amendments, all w.e.f. 01.10.2023:

• Entry 10 of Notification No. 10/2017-IT(Rate) omitted by Notification No. 13/2023-IT(Rate) dated 26.09.2023.
• In Notification No. 08/2017-IT(Rate), entry 9(ii), the words bringing in non-taxable-territory-to-non-taxable-territory transport were omitted by Notification No. 11/2023-IT(Rate) dated 26.09.2023.
• In Notification No. 09/2017-IT(Rate), entry 10, the proviso was substituted, removing clause (ii) on vessel transportation to the customs station — Notification No. 12/2023-IT(Rate) dated 26.09.2023.
• Section 13(9) of the IGST Act was omitted by section 162 of the Finance Act, 2023 read with Notification No. 28/2023-Central Tax dated 31.07.2023.

The last of those is the structural one. With section 13(9) gone, the place of supply of cross-border goods transportation falls back to the general rule in section 13.

What is not affected: IGST on import of goods

The Handbook's own illustration makes the distinction that gets blurred in practice. A company importing machinery from Germany files a Bill of Entry, IGST is computed on the CIF value and paid at the customs port, and the company claims that IGST as credit if the machinery is used for taxable supplies.

That is a customs levy on import of goods, collected under section 3(7) of the Customs Tariff Act read with section 5(1) of the IGST Act — not Entry 1 and not Entry 10. Mohit Minerals did not touch it. What ended was the separate levy on the freight service embedded in a CIF import.

Key takeaways

• Entry 1 of Notification No. 10/2017-IT(Rate) catches any service from a non-taxable territory, and the recipient in India pays IGST.
• The exception is the non-taxable online recipient, now defined as any unregistered person receiving OIDAR services — the "non-business purpose" condition was removed w.e.f. 01.10.2023.
• A person registered solely under section 24(vi) (TDS) counts as unregistered for that definition.
• The OIDAR definition widened on 01.10.2023 by deleting "essentially automated and involving minimal human intervention".
• Entry 10 on ocean freight was omitted w.e.f. 01.10.2023 after Mohit Minerals, along with the rate, exemption and section 13(9) amendments.
• The Court's reasoning: the importer is not the recipient of the shipping service in a CIF contract, and a separate levy on the service leg breaks the composite supply rule in section 8.
• IGST on import of goods at the customs port is unaffected.

Read next

• RCM Entry 16: Lending of Securities Under the SEBI Scheme
• ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route
• Section 9(4): The Promoter's 80% Shortfall

Disclaimer: Positions stated as on 5 September 2026, based on entries 1 and 10 (omitted) of Notification No. 10/2017-Integrated Tax (Rate), sections 2(16), 2(17), 5(3) and 13(9) of the IGST Act, 2017 as amended by the Finance Act, 2023 read with Notification No. 28/2023-Central Tax, Notification Nos. 11/2023, 12/2023 and 13/2023-Integrated Tax (Rate) dated 26 September 2023, Notification No. 38/2023-Central Tax, and Union of India v. Mohit Minerals Pvt. Ltd. [2022 (61) G.S.T.L. 257 (S.C.)], as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025).