No IGST on Ocean Freight under RCM for CIF Import: SC

In a recent verdict, the Supreme Court of India has ruled that Integrated Goods and Services Tax (IGST) cannot be levied on ocean freight for goods imported on Cost, Insurance, and Freight (CIF) basis under reverse charge mechanism (RCM). This decision was given on 7th July 2021 by the bench of Justices D Y Chandrachud and M R Shah.

The case was filed by Adani Enterprises, who imported coal from Indonesia on CIF basis and challenged the levy of IGST on ocean freight under RCM. The verdict stated that the levy of IGST on ocean freight is not justified under the current provisions of the IGST Act, 2017, and the Customs Act, 1962.

This decision is expected to bring relief to Indian importers who were earlier liable to pay IGST on ocean freight under RCM, which resulted in increased costs. With this ruling, the burden of paying IGST on ocean freight will now shift back to the foreign supplier of the goods.

However, it is important to note that this decision applies only to CIF imports and not to Free on Board (FOB) imports. For FOB imports, the importer is still liable to pay IGST on ocean freight under RCM.

The Supreme Court’s decision will have a significant impact on the Indian import-export industry, as it removes the additional burden on Indian importers and makes them more competitive in the global market. It is also expected to reduce litigation related to the levy of IGST on ocean freight under RCM, which was a contentious issue for many businesses.

Overall, this verdict is a positive development for Indian businesses, especially small and medium-sized enterprises (SMEs) and startups, as it will help them save costs and improve their competitiveness in the global market.