Government exploring all options against top court rulings related with IGST on Ocean Freight

The government is exploring all options including filing a review petition against the Supreme Court ruling that struck down the levy of IGST on Ocean Freight on transportation of products by vessel from an area outside India to an area in India.

IGST means Integrated Goods & Services Tax and levied on all inter-State supplies of products and/or services. it's applicable on any supply of products and/or services in both cases chief into India and export from India. The Supreme Court gave its ruling on May 19 which also include famous observation stating recommendations of the GST Council aren't binding on the governments,

Apex court’s ruling on GST may be a watershed 

“No decision has been taken on the said ruling. All options are being considered including filing a review petition,” a senior government official said. Further he said the matter is unlikely to be placed before GST Council. Options include, rescinding the notification, amend the law to negate the Supreme Court ruling and making the change retrospectively or challenge the ruling through filing a review petition.

Options

First option is done through an executive order while for second option, the govt will must move to Parliament. just in case review petition is filed and accepted, then the matter are heard before larger bench. If review petition is rejected, the Centre can file curative petition, which can precede a five judge bench.

In the matter of Mohit Minerals Pvt Ltd, the Supreme Court pronounced judgment by eliminating levy of IGST under reverse charge on Ocean Freight on transportation of products by vessel from an area outside India to an area in India. it had been given during a matter when Centre filed an appeal against judgment of the Gujarat tribunal, deeming the importer of products because the recipient of shipping services just in case primal of products on a Cost-Insurance-Freight (CIF) basis. The apex court agreed with the supreme court to the extent that a tax on the availability of a service, which has already been included by the legislation as a tax on the composite supply of products, can not be allowed.

The top court concluded that the govt. while exercising its rule-making power under the provisions of the CGST Act and IGST Act is bound by the recommendations of the GST Council. However, that doesn't mean that every one the recommendations of the GST Council are binding on the legislature’s power to enact primary legislations. IGST Act and therefore the CGST Act define reverse charge and prescribe the entity that's to be taxed for these purposes. The specification of the recipient – during this case the importer – by a notification is barely clarificatory.

It also said that said levy imposed on the ‘service’ aspect of the transaction is in violation of the principle of ‘composite supply’. Since the Indian importer is susceptible to pay IGST on the ‘composite supply’, comprising of supply of products and provide of services of transportation, insurance, etc. during a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of GST law.

Keeping these in mind, the Supreme Court dismissed the appeal filed by the Centre and agreed with the judicature to the extent that a tax on the availability of a service, which has already been included by the legislation as a tax on the composite supply of products, can not be allowed.