IGST Levied On Ocean Freight Not To Be Reviewed By GST Department

Mohit Minerals Pvt Ltd filed a petition challenging the vires of the CBIC notification before a division bench of the Supreme Court comprising Justice Dr D Y Chandrachud, Justice Surya Kant, and Justice Vikram Nath. There are three main elements to the petition.

The petitioner cannot be asked to pay tax on ocean freight again under a different notification after paying the IGST Act tax on the entire value of imports (including ocean freight).

As a second reason, in the case of CIF (Cost, Insurance, and Freight) contracts, both the service provider and the recipient are located outside the territory of India. In the case of a reverse charge mechanism, no tax can be collected on such a service.

Thirdly, in cases of high sea sales, the petitioner is held accountable as an importer. In contrast, the petitioner is not the recipient of the service. Exporter/transporter provided services to the petitioner's seller of goods on a high seas basis.

In the Mohit Minerals case, the Supreme Court quashed the imposition of IGST on ocean freight in a decision written by the Central Board of Indirect Taxes and Customs (CBIC).

According to a circular issued on 4 November, 'I would like to refer to your letter No.WHLCIMumCen/WICOF12019 dated 09.09.2022 and subsequent reminders dated 20.09.2022 and 03.10.2022 regarding the previously-mentioned matter. It is for your information that the Board has decided not to file a Review Petition in this matter. If you have any further action to take, please let me know..'

A previous decision of the High Court held that under the GST law, importers are required to pay IGST at a rate of 5 per cent on ocean freight services under the Reverse Charge Mechanism (RCM), whereby the duty of the importer is responsible for paying the IGST on behalf of the foreign buyer.

At the same time, the importer must also pay customs duty on the CIF value (which includes freight) of the goods imported into India. Consequently, ocean freight is subject to double taxation under GST law, which is an impediment and has increased import costs.

As a result of the Apex Court's decision, the Gujarat High Court has ordered the CBIC to refund goods and services tax paid on ocean freight within six weeks with interest.

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