The Supreme Court judgment scrapping Integrated Goods & Services Tax (IGST) on ocean freight will bring lot of relief for importers, according to tax experts. They also maintain that the comment on GST Council’s recommendations has brought clarity.
The apex court on Thursday said recommendations of the GST Council are not binding on the Centre and States and these have only persuasive value.
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The way forward
Aditya Singhania, Founder at Singhania’s GST Consultancy & Co, said the judgment has cleared the way forward and it will save the working capital requirement for relevant taxpayers. “It brings a way out for those entities who paid the tax and could not have claimed refund/adjusted with their output GST liability. Besides, it brings relief for taxpayers pan India who have already been issued the notice/memo for demand of GST along with interest and penalty on ocean freight under reverse charge,” he said.
Saket Patawari, Executive Director (Indirect Tax) with Nexdigm, felt that it will be of great relief to all the importers in the country. Many importers who had output GST liability, paid tax on ocean freight, claimed credit and utilised against their GST liability on their output/revenue. “The issue that may come up now is wherever GST was paid but credit not available/taken and two years have passed, then the refund claim may be time barred,” he said.
Tanushree Roy, Director (Indirect Tax) with Nangia Andersen LLP, said the levy of reverse charge on ocean freight is now unconstitutional in view of the landmark judgment. “Indian importers (who had paid GST under RCM on ocean freight) should evaluate the possibility of filing refund claims for claiming the said amounts (to the extent not utilised as input credit). Further, importers who had not paid the tax on import of such ocean freight services would no longer be required to pay GST on such services,” she said.
Co-operative federalism
Talking about the comment on recommendation by GST Council, SR Patnaik, Partner with Cyril Amarchand Mangaldas, said the ruling clarifies the relative powers and authority of the Parliament and State Assemblies compared to the GST Council. “The courts would now have to be more proactive in judicial review of GST legislation. This may also lead to a flooding of litigations challenging any discrepancy or unfavourable GST Council decisions,” he said.
Kumar Visalaksh, Partner with Economic Laws Practice, said the ruling reinforces the concept of co-operative federalism. “The Supreme Court has clearly held that Article 246A of the Constitution (through which GST was introduced) recognises the States as an equal partner with the Centre. The State is not subservient to the Centre or the GST Council. They are free to engage in co-operative as well as competitive federalism,” he said.