Bombay HC agrees to hear importers plea challenging IGST on ocean freight

      06/12/2019

The Bombay High Court on Tuesday agreed to hear a bunch of petitions filed by importers challenging the levy of Integrated Goods and Services Tax (IGST) on ocean freight. The plea, moved by Mumbai-based importer Victory Ventures, challenges a June 2017 notification by which the central government had clarified as to who constituted the exporter, importer and the service provider in case freight came into India via the ocean.

According to the notification, while the supplier of a service, or the exporter, is a person located in a non-taxable territory of India, the recipient of the service is the importer. Under GST laws, importers are required to pay 5 per cent IGST on ocean freight services under reverse charge mechanism. The importer pays this duty on behalf of the foreign buyers. Further, the importer also pays customs duty on the Cost, Insurance, and Freight (CIF) value of the product being imported via the ocean.

“The taxability of ocean freight has been a subject matter of dispute for some time now. The moot point is whether the importer of goods who is not the service recipient for freight as per the statutory definition and otherwise is liable to pay tax under the reverse charge mechanism”, said Abhishek A Rastogi, partner at law firm Khaitan & Co and advocate for the petitioners.

In their plea, the petitioners said that the transaction sought to be taxed by the government was the service of transportation of goods in a vessel provided by a shipping line not registered in India, to a person situated outside the taxable territory of India. The notification, therefore, was arbitrary in nature, the petitioners alleged. In a similar case heard last month, the Gujarat High Court had stayed the imposition of IGST on ocean freight. The court is slated to hear the case on June 19.