IGST: Taxpayers can now claim refund of marine cargo IGST: SC experts

Taxpayers who have paid GST on ‘Ocean Freight’ on imported goods will be entitled to claim a refund, following a Supreme Court ruling, if they do not claim an input tax credit, experts say.

In its judgment in the Mohit Minerals case, the apex court had said that since the Indian importer was liable to pay IGST on ‘composite supply’, including supply of goods at a CIF (cost) and provision of services like transportation, insurance etc. Insurance freight) agreement, a separate tariff on Indian importers for ‘service delivery’ by shipping lines … would be a violation of CGST law.

In this particular case, the company had challenged the validity of the CBIC notification in the Gujarat High Court regarding the imposition of integrated GST on marine freight products. The Supreme Court upheld the decision of the Gujarat High Court which was in favor of the company.

Tax Connect Advisory Services Partner Vivek Jalan said it was a great relief for importers and GST taxpayers. “In fact, taxpayers who have already paid GST can now ask for a refund.”

Naresh Seth, a partner at Dhruv Advisors, said, “Such tariffs, in fact, were a tax on transactions between two foreign parties that took place outside India which was clearly outside the territorial jurisdiction of the Indian government.”

Jalan added that in general, the value of imported goods is CIF and this includes costs, insurance and freight. So customs duty and GST are charged on such price.

“However, the CBIC has tried to impose GST of শতাংশ 5 per cent on the value of imported goods, considering 10 per cent of the value of imported goods as sea freight,” Jalan added.

Rajat Mohan, a senior partner at AMRG & Associates, said the Supreme Court had upheld the Gujarat High Court’s ruling classifying the imposition of IGST on maritime freight services as unconstitutional.

It is a dual assignment of IGST because it has already been taxed as part of the price of the product Moreover, these services are adopted by foreign exporters, thus Indian importers will not be liable to pay GST, he said.

“This opens a window of opportunity for importers who have already paid taxes demanding a refund from the exchequer,” Mohan added.

Ajay Sahai, DG, Federation of Indian Export Organizations (FIEO), said FIEO had already represented that goods imported on CIF basis should not be subject to sea freight duty as it was equivalent to double taxation, adding to the liquidity problem.

“Although IGST’s set-off on imports was available but over a period of time, it was adding challenges for manufacturers and exporters,” Sahai said.

Tanushree Roy, Director-Indirect Taxes, Nangia Andersen LLP, says it is now unconstitutional to impose reverse charges on marine freight products in the wake of the landmark Supreme Court of India ruling on marine freight.

“Indian importers (who paid GST under the Ocean Freight RCM) should consider the possibility of claiming a refund (unless used as input credit) for claiming the said amounts.

“Also, importers who have not paid tax on the import of such sea freight services will no longer have to pay GST on such services in view of this judgment,” Roy said.

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