In a recent judgement of Honourable Gujarat High court in case of Mohit Minerals Pvt Ltd, various applications were made regarding “the levy of the IGST on the estimated component of the Ocean Freight paid for the transportation of the goods by the foreign seller as sought to be levied and collected from the writ-applicants as the importer of the goods.”
The Central Government has introduced the Notification No. 8 of 2017 – Integrated Tax (Rate) dated 28th June 2017, wherein vide Entry No. 9, the Central Government has 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 upto the customs stations of clearance in India.
The Central Government, thereafter, issued the Notification No.10 of 2017 – Integrated Tax (Rate) dated 28th June 2017, by which the Central Government has notified that for the said category of service provided at Serial No.10 to the said Notification, the importer as defined in clause 2(26) of the Customs Act located in the taxable territory shall be the recipient of service.
In the writ made by the company the main plea was to delete such notification No. 8 as same lack legislative competency, ultra vires to IGST Act, 2017 and hence unconstitutional.
The major argument was that “The impugned Notification No.8/2017, through Entry 9(ii), has sought to levy the tax on the transactions including ‘service provided by a person located in a non-taxable territory to a person located in non-taxable territory’, by way of transportation of goods by a vessel. Indisputably, both, the service provider and the service recipients are outside India and such a levy goes beyond the mandate of Section 1 of the IGST Act, 2017, which extends to the whole of India and not outside India”
It was a long argument and the judgement went into 137 pages which you can read below.
The major observation made by the bench was that ” in a case of CIF contract, the contract for transportation is entered into by the seller, i.e. the foreign exporter, and not the buyer, i.e. the importer, and the importer is not the recipient of the service of transportation of the goods.”
The final judgement of the Honourable High court was “this writ-application along with all other connected writ-applications is allowed. The impugned Notification No.8/2017 – Integrated Tax (Rate) dated 28th June 2017 and the Entry 10 of the Notification No.10/2017 – Integrated Tax (Rate) dated 28th June 2017 are declared as ultra vires the Integrated Goods and Services Tax Act, 2017, as they lack legislative competency. Both the Notifications are hereby declared to be unconstitutional. Civil Application, if any, stands disposed of.”
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