30.07.2022: Gujarat High Court directs GST refund on ocean freight

The Gujarat High Court has provided relief to importers by directing the Centre to refund the Goods and Services Tax (GST) paid on ocean freight within six weeks with interest.

The ruling of the HC came after the levy of GST on ocean freight was struck down by Supreme Court (SC) in the Mohit Minerals case on May 19.

“The respondents are hereby directed to grant refund of the amount of IGST already paid by the applicants… along with statutory rate of interest on such refund within a period of six weeks from the date of submission of necessary documents by the applicants,” the HC said in an order dated July 7 in the matter of Louis Dreyfus Company India versus Union of India.

Many importers have filed multiple refund claims with the Central Board of Indirect Taxes and Customs (CBIC) after the SC struck down the levy of GST on ocean freight. The HC ruling may significantly benefit sectors that are outside the ambit of GST regime or are under inverted duty structure.

In the case of Mohit Minerals Pvt Ltd versus Union of India, a Gujarat HC ruling in January 2020 held that the Notification 8/2017 IGST (Rate) and Entry 10 of Notification 10/2017 IGST (Rate) levying IGST on ocean freight as ultra vires the IGST Act, and thereby unconstitutional for the lack of legislative competency. The SC upheld the HC ruling.

The Centre had notified that the IGST at the rate of 5% will be leviable on the service of transport of goods in a vessel, including the services provided or agreed to be provided by a person located in a non-taxable territory to 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 stations of clearance in India. This was sought to be levied and collected from the importers, who are neither supplier nor recipient of the services.

Source: Financial Express

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