IGST exemption on ocean freight

The government has decided to waive the 5% integrated GST on payments made for imported goods transported via ocean freight from next month.

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The government has introduced a waiver on the 5% integrated GST for payments made towards goods imported through ocean freight from Oct 1. The Finance Ministry has issued notifications amending the IGST Act concerning the payment of integrated GST for “ocean freight” on imported goods.

Abhishek Jain, the Head and Partner of Indirect Tax at KPMG said that the proposed amendments are in harmony with the Supreme Court’s decision in the Mohit Minerals case, and they serve to clearly articulate the government’s adherence to this stance.

“While this has been issued prospectively, the industry has been seeking and successfully claiming refund of taxes already paid for the past period, where credit has not been availed,” Jain added.

Last May, the Supreme Court made a significant ruling in the Mohit Minerals case. The court determined that because Indian importers are already obligated to pay IGST on the comprehensive supply, which includes the supply of goods and various services such as transportation and insurance within CIF (Cost Insurance Freight) contracts, imposing an additional charge on Indian importers for the services rendered by shipping lines would violate the GST Act.

In the Mohit Minerals case, the company challenged the validity of a CBIC notification related to the imposition of IGST on ocean freight in the Gujarat High Court, and the Supreme Court upheld the High Court’s decision.