The Finance Ministry has notified changes to the IGST Act exempting payment of 5% integrated GST under reverse charge mechanism on ‘ocean freight’ on imports by CIF (Cost, Insurance and Freight) contract, with effect from 1st October 2023.
Vijayendra Parvataneni, President MANSA the leading Association of the shipping Agencies that operate at Mumbai Port, Jawaharlal Nehru Port primarily and Pan India, hailed the government’s exemption of 5% integrated GST on ‘ocean freight’ on imports from October 1, aligning with the Supreme Court Bench Justices D. Y. Chandrachud, Surya Kant and Vikram Nath’s watershed judgement in the Union of India & Anr. v. M/s Mohit Minerals Pvt. Ltd. [Civil Appeal No. 1390 of 2022 dated May 19, 2022] upholding the judgement pronounced by the Hon’ble Gujarat High Court that no IGST is payable on ocean freight under Reverse Charge Mechanism (RCM) on contracts of Cost, insurance, and freight (CIF) imports of goods by the Indian importers since it is a composite supply of goods on which IGST is liable to be paid under Section 5(1) of the IGST Act read with Section 20 of the IGST Act, Section 8 and Section 2(30) of the CGST Act and no separate levy of IGST under RCM is to be made on the Indian importer for the supply of services of transportation of goods by the shipping line since it would be in violation of Section 8 of the CGST Act, 2017.
Importers who have remitted IGST under RCM for ocean freight can now seek refunds in line with this ruling.
MANSA extends its gratitude to the government for providing lucidity on this intricate matter. It believes that the government move will contribute to a more transparent and predictable tax landscape for the shipping industry, mitigating compliance burdens and fostering a conducive business environment.
Established in 1977, the erstwhile Mumbai Nhava Sheva Ship Agent Association (MANSA) was rechristened as Maritime Association of Nationwide Shipping Agencies – India in 2016.
