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The Supreme Court of Gujarat has declared the levying of integrated goods and services tax (IGST) on sea freight as ultra vires and has ruled that such a levy was not permitted by law.
The historic judgment brought great relief to the importing community because it became entangled in controversies that led to its being challenged before the Supreme Court.
The court has levied two notifications that levy the tax on the grounds that they lacked “legislative authority” and ruled that the law did not allow taxation.
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“We have come to the conclusion that no tax is due under the Integrated Goods and Services Tax (IGST) Act 2017 on Sea Freight for the services provided by a person located in a non-taxable territory through the transport of goods by a vessel from a place outside of India up to the customs clearance station in India and the levying and collection of such sea freight under the disputed notification is not legally permitted, “stated the bank led by justice JB Pardiwala.
The petition contesting the Center’s notification was moved by coal importers who have submitted IGST may be levied on the service provider or recipient of the service, not on importers paying customs duties.
Double tax
They also argued that IGST on sea freight amounted to double taxation and therefore unconstitutional.
He welcomed the ruling of the High Court, Abhishek Jain, tax partner, EY: “This ruling reinforces the non-tax position taken by various companies, especially those involved in the delivery of goods that are excluded and exempt from GST , to whom the credit from GST has been paid the said sea freight is clearly not available. This statement has also been a matter for the GST Council to consider and an explicit clarification of this aspect by the government should help put an end to the ongoing disputes in various states about this aspect. “
G. Natarajan, lawyer and senior partner of Swamy Associates, stated the judgment and stated that in the case of CIF imports (costs, insurance and freight) the sea freight is not paid by the Indian importer, but by the foreign exporter. The service is also provided by a foreign shipping company. In such a case, demanding service tax / GST for such transportation from the Indian importer is considered extraterritorial and inadmissible. Although this tax was introduced to create a level playing field for Indian shipping companies, the tax is so poorly established that it cannot withstand judicial review.
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