No more IGST on ocean freight imports from October 1

The Finance Ministry has notified modifications to the IGST Act concerning payment of integrated GST on ocean freight on imported goods with effect from October 1. Till September 2023, importers were required to pay 5% GST under the Reverse Charge Mechanism.

Abhishek Jain, Indirect Tax Head Partner at KPMG stated that the amendments projected are in line with the apex court’s ruling in the case of Mohit Minerals and mention the government’s alignment to the position.
He further added that the industry has been seeking and successfully claiming refunds of taxes already paid for the past period, where credit has not been availed.

In May last year, the Supreme Court ruled that Indian importers are responsible for paying IGST on composite supply, including transportation and insurance, under a CIF contract. An additional levy on the importer for shipping line services would violate the GST Act.

In the Mohit Minerals case, the company challenged the validity of the CBIC statement concerning the levy of IGST on ocean freight in the Gujarat High Court. The Supreme Court maintained the judgement of the High Court.