Page 31 - GSTL_7th May 2020_Vol 36_Part 1

2020 ] IGST ON OCEAN FREIGHT IN CASE OF IMPORT OF GOODS ON CIF BASIS J13
Importer cannot be made liable to pay tax on some supposed theory that
the importer is directly or indirectly recipient of the service. Thus, the importer
cannot be said to be the recipient of the supply of the ocean freight service and
no GST under reverse charge can be collected from the importer.
In view of the above, the impugned entry levying IGST under reverse
charge on supply of service of transportation of goods by a person in a non-
taxable territory to a person in a non-taxable territory from a place outside India
up to the Customs station of clearance in India and making the importer liable
for paying tax, is ultra vires the provisions of the IGST Act.
Supply of service of transportation of goods by a person in a non-taxable
territory to a person in a non-taxable territory from a place outside India up to
the Customs station of clearance in India is neither an inter-State supply as per
Section 7 of IGST Act, 2017 nor an intra-State supply as per Section 8 of IGST Act,
2017.
Time of supply of services in case where the tax is payable under the re-
verse charge basis is the earliest of the date of payment entered in the books of
account of the recipient or the date of debit in the bank account or sixty days
from the date of issue of invoice by the supplier. Thus, an importer cannot de-
termine the time of supply as per the provisions of Section 13(3) of the CGST Act.
A person other than the supplier or the recipient of the supply will not
be able to determine the value of supply as such person i.e. importer will not be
knowing the price actually paid or payable for the supply.
In case of ocean freight services, the importer of goods is not the recipi-
ent of supply of ocean freight services and may not be able to avail the input tax
credit, which is sought to be recovered under the impugned entry. Thus, the im-
pugned entry is not in conformity with the object of laws relating to the Goods
and Services Tax, i.e. credit shall be available at each stage and the burden of tax
shall only be on the customer.
In view of the above discussion, High Court has reached to the conclu-
sion that no IGST under reverse charge is payable on the ocean freight for the
services provided by a person located in a non-taxable territory by way of trans-
portation of goods by a vessel from a place outside India up to the Customs sta-
tion of clearance in India and the levy and collection of tax of such ocean freight
under the impugned entry is not permissible in law. Accordingly, the impugned
Entry No. 9(ii) of Notification No. 8/2017-I.T. (Rate), dated 28th June, 2017 and
the Entry 10 of the Notification No. 10/2017-I.T. (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 un-
constitutional to the extent it provides for levy of GST on ocean freight in case of
import of goods on CIF basis.
Conclusion
Revenue is likely to approach the Apex Court on this issue. It is highly
plausible that the Supreme Court will decide the issue in favour of the taxpayer
considering the legislative framework in place.
Since, we have seen many retrospective amendments in GST to nullify
the orders passed by the High Courts, it is possible that the Government may
retrospectively amend the GST law and attempt to remove the aforesaid incon-
gruities to effectuate the levy.
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GST LAW TIMES  7th May 2020  31