In a recent decision, the Bombay High Court held that separate levy on the Indian importer for ‘supply of services’ by shipping line, violative of Section 8 of the Goods and Service Tax Act, 2017 (GST Act).
It is the Petitioner’s case that, during the period from 23 rd April 2017 to 30th June 2017, the Petitioner imported required raw materials and spare parts for machinery under different bills of entry, and the bills of entry are 10 in number and are issued between 15th May 2017 to 24th June 2017.
It is the case of the Petitioner that transportation of goods in a vessel provided by a person located in non taxable territory to the person located in non-taxable territory was exempted from service tax available vide Sl. No. 34 of the Notification No.25/2012-ST and the same was made inapplicable w.e.f. 22nd January 2017, vide Notification No.1/2017-ST dated 12.01.2017.
The Petitioner has contended that, under the GST regime, IGST at 5% is imposed on the importer on transportation of goods in a vessel provided by a person located in a non-taxable territory to a person located in non-taxable territory from a place outside India up to the customs station for clearance in India vide Entry No.9(ii) in Notification No. 8/2017-Integrated Tax (Rate) with corrigendum dated 30th June 2017.
The contention of the Petitioner is to the effect that IGST on the transportation of goods in a vessel from a place outside India upto the customs station of clearance in India on the importer, on reverse charge basis, is arbitrary and illegal. It was contended that levy of service tax on the importer, who is neither the service provider nor the service receiver, is sought to be made in terms of the power conferred under sub-section (3) of Section 5 of the IGST Act.
A Division Bench of Justices Firdosh P Pooniwalla and GS Kulkarni observed that “It was held that levy imposed, on the service aspect of the transaction was in violation of principles of ‘composite supply’ enshrined under Section 2(30) read with section 8 of the GST Act. Since the Indian importer is liable to pay IGST on the ‘composite supply’ comprising of supply of goods and supply of services of transportation, insurance etc. in CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be violative of Section 8 of the GST Act. There is no dispute that such relief as prayed for stands covered by the decision of the Supreme Court in Union of India Vs. Mohit Minerals Pvt. Ltd.”
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