Bombay High Court Holds No Separate IGST On Ocean Freight Even Where Supplier And Place Of Supply Are In India
In a significant ruling concerning ocean freight taxation under GST, the Bombay High Court has held that separate levy of IGST cannot be imposed on transportation services forming part of CIF imports, even where the supplier of service and the place of supply are situated in India.
Key Ruling
The Court held that once customs duty and IGST have already been discharged on the composite import value, the freight component cannot again be subjected to a separate levy of GST in the hands of the shipping service provider.
Background
The petitioner, engaged in providing vessel services on hire and freight basis, was issued a show cause notice alleging that since the supplier of transportation service and the place of supply were both located in India, the transaction was liable to GST under forward charge.
The department sought to separately tax the freight component relating to goods imported on CIF basis.
Observations Of The Court
- In CIF contracts, transportation and insurance services form part of a bundled composite supply of imported goods.
- Once customs duty and IGST have already been paid on the composite import value, the freight component cannot again be taxed separately.
- Even if the supplier of service and the place of supply are situated in India, a separate levy of GST cannot be imposed where the transaction forms part of a composite supply already subjected to tax.
- Artificial segregation of freight component for independent taxation would violate the principle of composite supply under Sections 2(30) and 8 of the CGST Act.
- The Court reaffirmed the principles laid down by the Supreme Court in Mohit Minerals.
Key Takeaway
The ruling is significant because the Court clarified that mere existence of supplier of service and place of supply within India does not automatically permit a separate levy of GST where the freight component already forms part of the composite value of imported goods taxed at the time of import.
Conclusion
The Bombay High Court quashed the show cause notice and adjudication order and directed refund along with interest, reaffirming that ocean freight forming part of CIF imports cannot be artificially segregated for separate levy of GST.