Page 30 - GSTL_7th May 2020_Vol 36_Part 1

J12 GST LAW TIMES [ Vol. 36
Sl. Chapter, Description of Service Rate
No. Section or (per
Heading cent)
9(ii) Heading Transport of goods in a vessel including ser- 5%
9965 vices provided or agreed to be provided by a
(Goods person located in non-taxable territory to a per-
transport son located in non-taxable territory by way of
services) transportation of goods by a vessel from a place
outside India up to the customs station of clear-
ance in India.

Notification No. 10/2017-I.T. (Rate) (supra) further provides that where
the value of taxable service provided by a person located in non-taxable territory
to a person located in non-taxable territory by way of transportation of goods by
a vessel from a place outside India up to the Customs station of clearance in In-
dia is not available with the person liable for paying IGST under reverse charge,
the value of taxable service shall be deemed to be 10% of the CIF value (sum of
cost, insurance and freight) of imported goods.
From the combined reading of above provisions it emerges that an im-
porter of goods is liable to pay 5% IGST under reverse charge on services by way
of transportation of goods by a vessel from a place outside India up to the Cus-
toms station of clearance in India, provided by a person located in non-taxable
territory to a person located in non-taxable territory. In case actual value of ser-
vice (actual value of freight) is not known to importer, the same shall be deemed
to be 10% of the CIF value of imported goods.
Dispute
As per Section 5(3) of IGST Act, 2017, the liability to pay GST under re-
verse charge can be shifted on the ‘recipient’ of supply of goods or service. How-
ever, as per the Entry 10 of the Notification No. 10/2017-I.T. (Rate) (supra), the
liability to pay IGST under reverse charge has been shifted on the ‘importer’. Ac-
cordingly, impugned Entry No. 10 is contrary to the provisions of Section 5(3) of
IGST Act, 2017, under which the said notification has been issued.
Accordingly, writ petitions have been filed before High Court seeking re-
lief by declaring Entry No. 10 of Notification No. 10/2017-I.T. (Rate) (supra) ultra
vires to the IGST Act, 2017 and hence unconstitutional.
Main findings of the High Court while passing the judgment
In case of import of goods on the CIF basis, transportation of goods in a
vessel is the obligation of the foreign exporter. The foreign exporter enters into
contract with the shipping line for availing the services of transportation of
goods in a vessel. The obligation to pay consideration is also of the foreign ex-
porter. Importer in India is not at all concerned with how the foreign exporter
delivers the goods at the Indian port or whether the consideration of the ship-
ping line has been paid by the foreign exporter or not. Even in a case of non-
payment of the consideration of the freight by the foreign exporter, the shipping
line cannot recover the consideration from the importer in India.
Importer in India could be said to have neither availed the services of
transportation of goods in a vessel nor is he liable to pay the consideration of
such service. Hence, the importer is not the ‘recipient’ of the transportation of
goods in a vessel service as per Section 2(93) of the CGST Act.

GST LAW TIMES  7th May 2020  30