GST Dept. will not appeal against SC’s decision of quashing imposition of IGST on ocean freight: CBIC

The CBIC Legal Cell has issued Letter dated Nov 4, 2022 which informed that Board has decided that the GST Department will not appeal against Supreme Court decisions in Mohit Minerals Case, in which Supreme Court quashed imposition of IGST on ocean freight.

The Letter stated, “Please refer to your letter F. No. V/HLC/MumCen/WICOF/2019 dated 09.09.2022 and subsequent reminders dated 20.09.2022 and 03.10.2022, on the afore-mentioned subject.”

“In this regard, it is informed that the Board has decided not to file a Review Petition in the subject matter. This is for your information for further action at your end if any.”

A plea filed by Mohit Minerals Pvt Ltd challenging the legality of the CBIC notification was being reviewed by a division bench of the Supreme Court made up of Justice Dr. Dhananjaya Y. Chandrachud, Justice Surya Kant, and Justice Vikram Nath.

The petition primarily consists of three parts. First of all, since the petitioner had paid the tax required by the IGST Act on the total amount of imports (including the cost of the ocean freight), the tax on the ocean freight cannot be demanded once more under a separate notification. Second, in CIF contracts (Cost, Insurance and Freight), both the service supplier and the service user are located outside of India.

Even using the reverse charge mechanism, no tax on such services may be collected. Thirdly, the petitioner is not the service recipient at all in the instance of High Sea sales, yet the petitioner is made to bear the burden of proof as an importer. The exporter/transporter provided its services to the petitioner’s seller of goods on a high seas basis.

Prior to this, the High Court ruled that the Reverse Charge Mechanism (RCM), which requires importers to pay IGST on behalf of overseas buyers, expressly requires importers to discharge IGST at a rate of 5% on ocean freight services.

The importer additionally pays customs duty on the CIF value of the products that are brought into India, which also includes the freight component. As a result, the GST law doubles taxes the portion of ocean freight, which is a hindrance and has driven up the price of imports.

As a relief for importers following the Apex Court’s ruling, the Gujarat High Court ordered the CBIC to reimburse goods and services tax paid on ocean freight within six weeks with interest.

For Official Order Download PDF Given Below: