GST Dept will Not file Appeal Against Supreme Court Decisionfor restoring IGST on Ocean Freight: CBIC

GST Dept will Not file Appeal Against Supreme Court Decisionfor restoring IGST on Ocean Freight: CBIC

The Central Board of Indirect Taxes and Customs (CBIC) has declared that the GST department will not challenge the Supreme Court decision in Mohit Minerals wherein the Apex Court has quashed the levy of IGST on ocean freights.

The CBIC Legal Cell has issued Letter vide F.No. 275/11/2022-CX.8A dated November 04, 2022, stated that “Please refer to your letter F. No. WHLCIMumCen/WICOF12019 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 on the subject matter. This is for your information for further action at your end if any.”

Background :

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 VikramNath.

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.

Thirdly, in the case of High Sea sales, the burden is cast on the petitioner as an importer whereas, the petitioner is not the recipient of the service at all. It is the petitioner’s seller of goods on a high sea basis who has received the services from the exporter/ transporter.

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 on 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