GST: Kerala High Court stays demand of IGST on Ocean Freight [Read Order]

GST- Kerala High Court - IGST - Ocean Freight - Taxscan

The Kerala High Court issued the notice to the Central Board of Indirect Taxes and Customs (CBIC) in a plea challenging applicability of GST on importers of goods who are not a recipient of Service.

The Petitioner, KVN Impex Pvt. Ltd. is importing goods from abroad on a CIF/CF basis, on agreement to deliver the goods at the Port at Cochin. As per Notification 10/2017 Integrated Tax (Rate) dated June 28, 2017 liability to pay Integrated Goods and Service Tax, on service of transportation of goods by ship, rendered by a person located in non taxable territory to another person in non taxable territory, has been fixed on Importer of goods.

Under Section 5 (3) of Integrated Goods and Service Tax Act read with Sections 2(93) and 2(98) of Central Goods and Service Tax Act, the tax under Reverse Charge Mechanism can be fastened only on the recipient of services.

Reverse Charge means the liability to pay tax by the recipient of services or both instead of the supplier of such goods or services or both under sub-section (3) or sub (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act.

The recipient of service means the person who is passing the consideration for the service rendered.

The Petitioner is neither the provider nor recipient of the service but the Importer of goods, who is not a party with regard to service of transportation of goods or ocean freight. His contract is with the supplier of goods on CIF/C basis as per which the goods have to be delivered at the port of destination from where he is taking delivery after paying Integrated Goods and Service Tax on the goods imported.

“Since tax has been fixed by Notification No. 10/2017 integrated Tax (Rate) dated June 28, 2017 on the importer of goods who is not a recipient of services is ultra vires and against the provisions of the Integrated Goods and Service Tax Act 2017 and Central Goods and Service Tax Act 2017. Hence the Show Cause Notice is illegal and without any jurisdiction,” the petition said.

The Single Judge bench of Justice A.M.Badar while issuing the notice to the CBIC, DGGI and Joint Commissioner of Central Tax and Central Excise granted the interim relief by staying further actions in pursuant to the show cause notices issued under Notification No. 10/2017 integrated Tax (Rate) dated June 28, 2017.

Advocates K.P Abdul Azees, Akhil Suresh, T. Archana appeared for the petitioners.

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