10/2024-Central Tax — Seeks to amend the Notification no. 02/2017-CT dated 19.06.2017 with effect from 5th August, 2023
Summary
Basically, this notification amends an earlier notification (02/2017-CT) from 2017. That old notification had a clause that said the importer was responsible for paying GST on the services provided by the shipping line (the ocean freight), even when those services were provided outside India. This was a complex legal issue and caused a lot of disputes. The Supreme Court ultimately ruled that this type of tax collection was not legally sound.
So, notification 10/2024 is essentially walking back that part of the old notification. It removes the importer’s obligation to pay GST on ocean freight when the supplier of that freight service is located outside of India. Importantly, this change is applied retroactively, meaning it's effective from August 5th, 2023.
Who does this affect? Importers who have already paid GST on ocean freight for services provided by foreign shipping lines between August 5th, 2023, and the date of this new notification will be most interested. They may be eligible to claim a refund of that GST. You'll need to consult with your tax advisor to understand the exact process and deadlines for claiming any refund. This notification brings the GST rules in line with the Supreme Court's decision and simplifies things for importers going forward.
Key Changes
| Change | Impact |
|---|---|
| Retrospective Amendment to Exemption for Ocean Freight Services | This notification retrospectively validates the levy and collection of GST on ocean freight services for import of goods under CIF contracts. This essentially reverses earlier court rulings that had challenged the taxability of such services, potentially leading to demands and litigations for importers who availed exemption based on the previous interpretation. |
| Clarification on Scope of "Services by way of transportation of goods by vessel" | The amendment clarifies that the exemption granted to services of transportation of goods by vessel includes services of both import and export. This aims to provide certainty and avoid disputes regarding the applicability of the exemption to export freight. |
| Validation of Past Actions | The notification includes a validation clause which seeks to protect the actions taken by the government in levying and collecting GST on ocean freight services between the specified period. This provides legal backing to past assessments and collections, thereby reducing the risk of refunds and challenges. |
| Impact on Ongoing Litigation | This retrospective amendment will directly impact ongoing litigations related to the taxability of ocean freight under CIF contracts. The government's intent is to effectively overturn the judgments that were in favor of importers and strengthen its position in these cases. |