Indian govt exempts ocean freight payments from 5% GST

Quick Summary

Starting October 1, India exempts ocean freight payments from 5 percent integrated GST (IGST), aligning with a Supreme Court ruling.

The Indian government has decided to exempt payments for goods imported via ocean freight from the 5 percent integrated GST (IGST) with effect from October 1. Previously, importers were required to pay this 5 percent GST under the Reverse Charge Mechanism.

The Finance Ministry has notified these changes to the IGST Act, aligning with the Supreme Court’s ruling in the Mohit Minerals case.

KPMG’s Indirect Tax Head & Partner, Abhishek Jain, noted that these amendments are consistent with the Supreme Court’s decision in the Mohit Minerals case and underline the government’s adherence to this position.

Jain added that while the changes are effective prospectively, the industry has been seeking and successfully claiming refunds for taxes paid in the past periods where credit was not availed. In May of the previous year, the Supreme Court ruled that imposing a separate levy on Indian importers for the supply of services by the shipping line was in violation of the GST Act in cases where the Indian importer is already liable to pay IGST for the composite supply.

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