Government Exempts 5% Integrated GST on Ocean Freight Imports, Effective from October 1, 2023

Government Exempts 5% Integrated GST on Ocean Freight Imports, Effective from October 1, 2023

Ira Singh
29 Sep’23

In a significant move to boost trade and reduce the cost burden on importers, the Indian government has announced the exemption of the 5% Integrated Goods and Services Tax (IGST) on ocean freight imports, starting from October 1, 2023. This decision, taken by the Finance Ministry, is expected to have far-reaching implications for the country’s import-export sector, making imports more affordable and promoting international trade.

The Finance Ministry has notified changes to the IGST Act with regard to payment of integrated GST on ‘ocean freight’ on imported goods with effect from October 1.

Currently, importers are required to pay 5 per cent GST under the Reverse Charge Mechanism.According to the sources,one of the experts said the amendments proposed are aligned with the apex court’s ruling in the case of Mohit Minerals and help explicitly mention the government’s alignment to the position.

“While this has been issued prospectively, the industry has been seeking and successfully claiming refund of taxes already paid for the past period, where credit has not been availed,” the expert added.

Giving its ruling in the Mohit Minerals case, the Supreme Court in May last year had held that 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 a CIF (Cost Insurance Freight) contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of the GST Act, according to the sources.

In the Mohit Minerals case, the company challenged the validity of the CBIC notification regarding the levy of IGST on ocean freight in the Gujarat High Court. The Supreme Court upheld the decision of the High Court, according to the sources.