The Gujarat High Court, in a landmark judgment, has said that the levy and collection of the tax on ocean freight was not permissible under the law. Allowing petitions against the integrated goods and services tax (IGST), the court said the tax on ocean freight was violative of the Constitution. The taxability dispute on ocean freight has been finally decided by the court to hold that taxing the ocean freight is ultra vires and leads to double taxation, said an expert, as per a report.
The petitioners had raised questions on the additional tax levied on the ocean freight element when the basic Customs duty and IGST were already paid on the CIF value. This indicated double taxation, given that the ocean freight element already includes CIF. 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, as well as an additional IGST component on ocean freight between two foreign parties for movement of such goods. Now the Indian importer is no longer required to discharge tax under the reverse charge mechanism (RCM) on the deemed value pertaining to the ocean freight, the report explained.
However, the revenue authority is likely to approach the Supreme Court on this matter, it is assumed.
