Supreme Court Ruling on IGST on Ocean Freight: A Win for Importers

In a landmark decision with significant implications for Indian importers, the Supreme Court has ruled on the levy of Integrated Goods and Services Tax (IGST) on ocean freight under Cost, Insurance, and Freight (CIF) contracts. The verdict brings clarity and potential relief to businesses across the nation.

The Core of the Matter: Union of India vs. Mohit Minerals

The case, Union of India vs. Mohit Minerals, centered around the legality of levying IGST on the import of goods where the consideration for ocean freight was already included in the CIF value. The crux of the issue was whether imposing IGST again on the ocean freight component amounted to double taxation.

Key Findings of the Supreme Court

• The Supreme Court held that the imposition of IGST on ocean freight under CIF contracts through delegated legislation was unconstitutional.
• The court emphasized that such a levy lacked a proper legal foundation and resulted in double taxation, as the value of ocean freight was already factored into the CIF value of the imported goods.

Implications for Indian Businesses

This ruling has far-reaching consequences for Indian businesses involved in import activities. By declaring the levy of IGST on ocean freight unconstitutional, the Supreme Court has provided much-needed relief from what was perceived as an additional and potentially unfair tax burden.

The implications include:

• Reduced import costs for businesses, potentially leading to lower prices for consumers.
• Simplified tax compliance and reduced administrative burdens for importers.
• Increased clarity and certainty in the application of GST laws.

The decision is expected to foster a more conducive environment for international trade and promote economic growth by reducing the cost of imports for Indian businesses. The government may need to revisit certain aspects of the GST framework following this judgement to ensure compliance and fairness.