Govt exempts 5% integrated GST on ocean freight imports from October 1, 2023

Govt exempts 5% integrated GST on ocean freight imports from October 1, 2023
The government has exempted payments made for goods imported through ocean freight from 5 per cent integrated GST with effect from October 1, 2023.

The Finance Ministry has notified changes to the IGST Act with regard to payment of integrated GST on ‘ocean freight’ on imported goods with effect from October 1.

Currently, importers are required to pay 5 per cent GST under the Reverse Charge Mechanism.

One of the experts said the amendments proposed are aligned with the apex court’s ruling in the case of Mohit Minerals and help explicitly mention the government’s alignment to the position.

“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,” the expert added.

Giving its ruling in the Mohit Minerals case, the Supreme Court in May last year had held that since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc in a CIF (Cost Insurance Freight) contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of the GST Act.

In the Mohit Minerals case, the company challenged the validity of the CBIC notification regarding the levy of IGST on ocean freight in the Gujarat High Court. The Supreme Court upheld the decision of the High Court.