The government’s recent announcement, effective from October 1, exempts payments for goods imported via ocean freight from the 5 percent integrated Goods and Services Tax.
The Finance Ministry has officially modified the IGST Act, specifically addressing the payment of integrated GST on ‘ocean freight’ for imported goods, beginning October 1.
As it stands, importers are obligated to remit a 5 percent GST under the Reverse Charge Mechanism.
The proposed amendments align with the Supreme Court’s verdict in the Mohit Minerals case and clearly express the government’s stance.
Although these amendments apply prospectively, the industry has successfully sought refunds for taxes previously paid in situations where credit was not utilized.
Important: Easy to Learn Ocean Freight Taxability Under GST Law with Impact
In its May ruling last year in the Mohit Minerals case, the Supreme Court established that, in a CIF (Cost Insurance Freight) contract, where the Indian importer is responsible for IGST on the ‘composite supply’ encompassing both goods and services like transportation and insurance, an additional levy on the Indian importer for the ‘supply of services’ by the shipping line would contravene the GST Act.
Mohit Minerals, in a legal challenge, questioned the legitimacy of the CBIC GST notification concerning the imposition of IGST on ocean freight before the Gujarat High Court. The Supreme Court affirmed the High Court’s ruling.
