The Gujarat High Court, while admitting a petition challenging the levy of Integrated Good and Services Tax (IGST) on Ocean Freight payable on transportation of goods by a vessel, has sent notice to the Central Government.
A bench comprising Justices Akil Khureshi and Justice B N Karia was hearing a writ petition wherein the petitioner challenged the constitutional validity of the Notification No. 10/2017-Integrated Tax [Rate] dated 28th June 2017, as per which they were asked to pay tax at the prescribed rate all over again on the ocean freight.
The petitioner is an importer of non-cooking coal and on such imports. They pay Customs duty, the value of which includes Ocean Freight. On the same valuation, the petitioner also pays tax under the Integrated Goods & Service Tax Act, 2017.
Advocate JK Mittal, the counsel for the assessee contended that the petitioners are paying IGST on the entire value of imports; inclusive of the ocean freight, and therefore, they cannot be asked to pay tax on the ocean freight all over again under a different notification. Further, in case of CIF contracts, the service provider and service recipient both are outside the territory of India. Hence, no tax on such service can be collected even on reverse charge mechanism. It further contended that in case of High Sea sales, the burden is cast on the petitioner as an importer whereas, the petitioner is not the recipient of the service at all. It is the petitioner’s seller of goods on high sea basis who has received the services from the exporter/ transporter.
Counsel for the petitioner further submitted that the impugned Notifications are ultra vires the Act and are in any case in exercise of excessive delegation of powers of subordinate legislation.