Changes Notified: No IGST on Ocean Freight in CIF Contracts

• Earlier, importers in India were liable to pay IGST on ocean freight paid on imported goods under the reverse charge mechanism, leading to double taxation.
• The issue was challenged in court, and the Gujarat High Court declared the relevant notifications as ultra vires to the IGST Act.
• The Revenue Department appealed the decision to the Supreme Court.
• The Supreme Court held that the importer of goods would be considered the recipient, and the supply of services provided by the foreign shipping line to the foreign exporter in a CIF contract would be made to the Indian importer.
• The court also held that there cannot be a separate levy of IGST on the component of ocean freight in the CIF contract.
• To end the dispute, the Central Board of Indirect Taxes and Customs (CBIC) made changes to the notifications.
• The CBIC omitted the relevant provisions from the IGST Service Rate Notification and the Reverse Charge Service Notification.
• The CBIC also made changes to the IGST Service Exemption Notification.
• As a result, importers are no longer required to pay IGST on ocean freight services under the reverse charge mechanism.

Source: a2ztaxcorp.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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