In a recent move, the Indian government has decided to waive the 5% integrated GST on ocean freight for imported goods, effective from October 1, 2023. The Finance Ministry made amendments to the IGST Act to implement this exemption, relieving importers from the previous obligation of paying 5% GST under the Reverse Charge Mechanism.
This decision aligns with the Supreme Court’s ruling in the Mohit Minerals case, underscoring the government’s position on this matter. The apex court had clarified that imposing a separate levy on Indian importers for the ‘supply of services’ by the shipping line would contradict the GST Act, considering the composite nature of the supply involving transportation, insurance, and more in a CIF (Cost Insurance Freight) contract.
KPMG’s Head of Indirect Tax, Abhishek Jain, acknowledged the alignment of the proposed amendments with the Supreme Court’s stance. He noted that the industry had already been successfully seeking refunds for taxes paid in the past periods where credit had not been utilized.
The case of Mohit Minerals, which challenged the validity of the CBIC notification regarding the levy of IGST on ocean freight, saw the Supreme Court upholding the decision of the Gujarat High Court. This move is expected to benefit the industry and streamline tax payments for importers, ultimately fostering a more conducive business environment.