SC confirms decision of Gujarat HC not to levy IGST on ocean freight


AHMEDABAD: The Supreme Court recently upheld Gujarat High Court’s judgment to refrain from levying IGST on sea freight at 5% GST. These charges are levied for the transportation of goods imported from outside India to any place in India. The judgment also clarified that the GST Council’s recommendations are not binding on states or the Center.

The GST Council will meet for the next time in September 2022 in Madurai. One of the items on the agenda is to implement the Supreme Court’s decision regarding the GST on ocean freight. The date of the 48th meeting of the GST Council has not yet been decided.

The GST Council will meet and discuss the cancellation of the previous circular issued for the collection of IGST on sea freight. A senior government official informed.

In addition, the circular that may be issued will also cover the aspects of reimbursement of the IGST. The Gujarat High Court had ordered such repayment to be made within six weeks, together with interest.

Gujarat HC had previously declared two notifications for the above with a corrigendum issued by the CBIC to be unconstitutional. When it concluded that these notifications were ultra vires statute, the Center appealed to the SC against the HC’s order. They considered the consignee in these transactions to be the importer of goods on a cost, insurance and freight (CIF) basis. However, they are already levied IGST on the CIF basis on the composite value of the supply of imported goods.

The first notification was 10/2017 and issued on June 28, 2017. It notified that the IGST must be paid by the importer on 10% of the CIF value on a reverse charge basis for transport by vessel from outside the country to the clearing point in India. . A corrigendum was published two days later.

The HC observed in Mohit Minerals v Union of India (UOI) that the consignee specified as importer is only a clarification. No taxable person is prescribed by the GST Act for this purpose. It is further observed that the levy on maritime freight, apart from the IGST levy on the composite supply for the importation of goods on a CIF basis, is contrary to Article 8 of the CGST law (Scope of supply).

Accordingly, the CBIC is working on a circular to clarify the above issue to its ratepayers.

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