The interim stay order passed by the Gujarat High Court, in a petition filed by Ghanshyamlal and Company stayed the impugned demand where the petitioners challenged the vires of IGST related notification.

Earlier, there were reports stating that the High Court has stayed the levy of Integrated Goods & Service Tax (IGST) on ocean freight. 


The order passed by the two-judge bench comprising Justice Harsha Devani and Justice Bhargav D Karia stated that “Under the circumstances, issue Notice, returnable on 19.6.2019. By way of ad interim relief, the impugned order dated 27.4.2019 (Annexure D to the petition) has stayed.” 


The GST law provides for a specific provision with respect to taxability on the component of ocean freight. The law specifically provides that the importers are required to discharge IGST at the rate of 5 percent on ocean freight services under the Reverse Charge Mechanism (RCM) under which, the duty of importer have to pay IGST on behalf of the foreign buyer. However, at the same time, customs duty on the CIF value (which includes the component of freight as well) of the goods imported into India is also paid by the importer. As a result, there is double taxation on the component of ocean freight under GST law which is an impediment and has bloated the cost of imports. 


Last year, a petition was filed by Mohit Minerals Pvt Ltd challenged vires of the said notification. The petition has principally three elements. First, having paid the tax under IGST Act on the entire value of imports (inclusive of the ocean freight), the petitioner cannot be asked to pay tax on the ocean freight all over again under a different notification. Secondly, in case of CIF (Cost, Insurance and Freight) contracts, the service provider and service recipient both are outside the territory of India. No tax on such service can be collected even on reverse charge mechanism. And thirdly, in 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 high sea basis who has received the services from the exporter/ transporter. The matter is pending before the Court. 


Now, a similar petition is filed by Ghanshyamlal and Company where the Court decided to hear both the petitions together this year.


Published On : 21-05-2019


Source : Tax Scan

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