Ocean Freight: The Ocean Freight ruling may change the Supreme Court’s observation

The Supreme Court ruling in the maritime freight case, which is set to relieve a number of Indian companies and importers, could also change the way goods and services tax (GST) structures work in the country, legal experts say.

The Supreme Court on Thursday ruled that the sea freight GST paid for import of goods is unconstitutional. Also, Indian importers who have paid such tax will be eligible for refund.

In addition, importers who have not paid taxes on service imports will no longer have to pay taxes due to the Supreme Court ruling.

The court further held that the recommendations of the GST Council are not binding on the Union or the State and have a persuasive value.

GST judgment: SC judgment can change the concept of ‘one country, one tax’

On Thursday, the Supreme Court ruled that the GST on sea freight paid for importing goods is unconstitutional. While the maritime freight ruling is set to provide relief to a number of Indian companies, it could also change the way the Goods and Services Tax (GST) structure works in the country. Here’s how.

“This ruling could change the landscape of provisions under GST that are subject to judicial review. “Since the court has clearly held that the recommendations of the GST Council have only persuasive value, there will be a realistic approach to such provisions subject to judicial review by challenging the constitutionality of such provisions based on the recommendations of the GST Council.” The High Court, the Supreme Court and various other courts argued in favor of the petitioners.

Parliament and state legislatures have equal powers to legislate on GST, the SC has ruled.

Experts say it will be interesting to see if this will affect some of the ongoing debates involving the state and the center.

ET first reported the controversy in 2017 when the tax department began issuing notices.

The main problem is that, in most cases, payments are made by sea freight vendors or companies that are not based in India. So, for example, if a Europe-based company exports goods to India, the company enters into an agreement with the shipping companies and pays the freight of the sea.

In such cases, the tax department is unable to collect GST from the European Union. The tax department is hoping to recover IGST from importers or companies based in India through “reverse charge process”.

The government had approached the Supreme Court against the earlier judgment of the Gujarat High Court, saying that the IGST (Integrated GST) of sea freight was unconstitutional.

In the last few months or so, the tax department has started issuing new tax claims and issued notices to companies about the GST on sea freight.

Some companies have even failed to file a writ petition against the decision of the tax department to issue tax notices in various courts.

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