“Whether an Indian importer can be subject to the levy of the IGST on the component of Ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis,” was the issue in Union of India vs. Mohit Minerals. The Gujarat high court held that under the IGST Act, 2007, no tax is levied on ocean freight for services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. The imposition and collection of tax on such ocean freight under the contested Notifications is unlawful. The Supreme Court, led by Justice Dhananjaya Y Chandrachud, interpreted the relevant legislative requirements to conclude that the GST Council’s recommendations are not obligatory on the Centre or the states, and that they only have persuasive value. The imposition of IGST on importers in respect of ocean freight services which are provided by international shipping lines to foreign suppliers in a CIF contract for the import of goods into India has been struck down by the Supreme Court. This judgement was made on the basis that a CIF contract for the import of commodities constitutes a composite supply, consisting of both goods and services such as transportation, insurance, and so on, for which the Indian importer is exempt from IGST. The court noted that the Goods and Service Tax Act, 2017 (GST Act) makes no provisions for situations in which the laws of the Centre and states conflict, and that it is up to the GST Council to provide appropriate advice if such scenarios arise.
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