CBIC not to file review petition in SC for restoring IGST on ocean freight

The Central Board of Indirect Taxes and Customs (CBIC) has decided not to file a review petition in the Supreme Court against the latter's decision to quash integrated goods and services tax (IGST) on ocean freight.

The Board gave this information through its communication to the field formation.

Ocean freight is the cost incurred through an agreement between two foreign parties to ship goods to India. For instance, if goods are exported from Washington, the exporter concerned may enter into an agreement with a shipping line there and pay ocean freight to it.

A provision in the Central GST Act permitted levy of both basic customs duty and IGST on the cost, insurance and freight (CIF) value of goods brought into India. A government notification later also extended IGST to ocean freight on importers on the reverse charge mechanism. Under GST, service tax is usually paid by sellers of services, but where it becomes difficult for the government to receive tax from sellers, it imposes it on recipients of services. This is called the reverse charge mechanism.

The matter went to the Gujarat High Court which had declared IGST on ocean freight as violative of the Constitution.

The Union government then moved the Supreme court against the order. The apex court also struck down the levy, saying it is in violation of the principle of “composite supply” enshrined in the CGST Act.