Taxpayers can seek IGST refund on sea freight
New Delhi:
Experts said taxpayers who have paid GST on ‘ocean freight’ on imported goods would be entitled to claim refund after the Supreme Court ruling, provided they have not claimed input tax credit.
Giving its verdict in the Mohit Minerals case, the Supreme Court held that since the Indian importer is liable to pay IGST on ‘aggregate supply’, which includes the supply of goods and services of transportation, insurance etc. in CIF (cost) Is. insurance freight) contract, a separate levy on the Indian importer for ‘supply of services’ by a shipping line … would be in violation of the CGST Act.
In this particular case, the company had challenged the validity of the CBIC notification regarding levy of Integrated GST on maritime goods in the Gujarat High Court. The Supreme Court upheld the decision of the Gujarat High Court in favor of the company.
Vivek Jalan, Partner, Tax Connect Advisory Services, said that this is a big relief for the importers and GST taxpayers. “Indeed those taxpayers who had already paid GST can now seek refund of the same”.
“Such a levy was, basically, a tax on transactions between two foreign parties taking place outside India, which is clearly outside the territorial jurisdiction of the Government of India,” said Naresh Sheth, partner at Dhruv Advisors. Mr Jalan further added that generally the value of imported goods is CIF and includes cost, insurance and freight components. Hence customs duty and GST are levied on such value.
“However, CBIC also sought levy of GST at the rate of 5 per cent on the value of imported goods, which is 10 per cent of the value of imported goods considered to be sea freight,” Mr. Jalan said.
Rajat Mohan, Senior Partner, AMRG & Associates said that the Supreme Court has upheld the Gujarat High Court’s decision which held that the levy of IGST on maritime freight services was unconstitutional.
This is a double duty of IGST as the tax has already been paid as part of the value of the goods. Further, these services are procured by the foreign exporter, thus the Indian importer will not be held liable to pay GST on the same, he said.
“Through this, a window of opportunity has been opened for those importers, who have already paid tax, to seek refund from the treasury,” Mohan said.
Federation of Indian Export Organizations (FIEO) DG Ajay Sahai said that FIEO has already represented that goods imported on the basis of CIF should not be carried by sea freight as it amounts to double taxation, leading to liquidity constraints. The problem escalates.
Mr Sahai said, “While adjustment of IGST on imports was available, but after a time lag, it was adding to the challenges for the manufacturers and exporters.”