IGST on ocean freight is not permissible under law: Gujarat High Court

The Gujarat High Court has declared imposition of integrated goods and services tax (IGST) on ocean freight as violative of the Constitution. Ocean freight is the cost incurred through an agreement between two foreign parties to bring goods to India via ocean.

Allowing petitions against the tax, the court said the levy and collection of tax on ocean freight was not permissible under the law.

“The taxability dispute on ocean freight has been finally decided by the court to hold that taxing the ocean freight is ultra vires and leads to double taxation,” said Abhishek Rastogi, partner at Khaitan & Co. Petitions are also pending before the HCs in Delhi and Mumbai, in this matter.

Explaining the case, Rastogi said a provision in the Central GST Act permitted levy of both basic Customs duty and IGST on the cost, insurance and freight (CIF) value of goods brought into India, as well as an additional IGST component on ocean freight between two foreign parties for movement of such goods.

For instance, if goods come from Washington to London and are shipped further to Mumbai, there is an element of ocean freight between the parties in Washington and London. This could include steamship costs, broker commissions, duties and tariffs, vessel and port maintenance costs, and labour costs, etc.

The petitioners have raised questions on the additional tax levied on the ocean freight element, when the basic customs duty and IGST are already paid on the CIF value. This indicates double taxation, given the ocean freight element already includes CIF.

Delhi HC issues notices to exporters over non-payment of IGST on imports

The Delhi High Court has issued notices to exporters in cases related to non-payment of integrated goods and services tax (IGST) on imports under an export incentive scheme.

The cases relate to the review petition filed by revenue authorities regarding imposition of IGST on imports of goods under the advance authorisation scheme, which allows exporters to import goods that go into exports without payment of duties.

Under the GST regime, the exemption was not clearly mentioned till October 13, 2017. During the period, exporters were not allowed to clear their goods unless they pay IGST.

Miffed at this, exporters moved the Delhi High Court, arguing that the prevailing exemptions under the custom notifications could not have been denied merely on the premise of the introduction of a new levy under GST with effect from July 1, 2017.

The court had held that the benefit of exemption existed at that point of time, the most appropriate course would be for the respondent authorities to verify whether the petitioner has fulfilled the export obligations pursuant to the advance licences. If petitioner has done, there is no need for any further action. The Central Board of Indirect Taxes and Customs (CBIC) moved a special leave petition (SLP) in the Supreme Court against the order in April. However, the SLP was dismissed by the court. CBIC then went to the Delhi High Court for review of its order. Following this, the court issued notices to the exporters.

Abhishek Rastogi, counsel of petitioners and partner at Khaitan & Co, said: “It will be interesting to see how the High Court reacts when the revenue’s SLP has already been dismissed by the Supreme Court.”

He said the SLP would only aggravate problems for the exporters when the economy is facing a slowdown and India has already lost to the US at the World Trade Organisation with respect to the incentive policies for exporters.