SC upholds Guj HC decision not to levy IGST on ocean freight

The GST Council will be next meeting in September 2022 at Madurai. One of the items on the agenda is to implement the Supreme Court’s ruling regarding GST on ocean freight. The date of the 48th GST Council meeting is not yet finalised. 

The SC has recently upheld the judgement passed by the Gujarat High Court to refrain from levying IGST on ocean freight at 5% GST. Such charges are collected for transporting imported goods from outside India to any place in India. The judgement also clarified that GST Council’s recommendations are non-binding on the states or the Centre.

The GST Council will hold a meeting and discuss quashing the earlier Circular issued for levying IGST on ocean freight. A senior government official informed the same to BusinessLine publication.

Further, the Circular that may be issued will also cover aspects of the IGST refund. The Gujarat High Court had ordered such a refund to be issued within six weeks, together with interest. 

The Gujarat HC had earlier called out that two notifications for the above with a corrigendum issued by the CBIC are unconstitutional. When it concluded that these notifications were ultra vires to the statute, the Centre filed an appeal before the SC against the HC order. They deemed that the recipient in these transactions is the importer of goods on a Cost, Insurance, and Freight (CIF) basis. However, they are already being levied IGST on CIF basis on the composite value of the supply of goods imported.

The first notification was 10/2017 and issued on 28th June 2017. It notified that IGST must be paid by the importer on 10% of CIF value on a reverse charge basis for transportation by vessel from outside the country up to Customs Clearance Station within India. Corrigendum was issued two days later.

The HC observed in the Mohit Minerals vs Union of India (UOI) case that the recipient specified as the importer is only clarificatory. No taxable person is prescribed under the GST law for this purpose. It is further observed that the levy of ocean freight, apart from the IGST levy on the composite supply for the import of goods on a CIF basis, is against Section 8 of the CGST Act (Scope of supply).

Accordingly, the CBIC is working on a Circular to clarify the above matter to its taxpayers.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@clear.in