Tax Natarajam: SC Ruling on Ocean Freight On GST Council’s powers.  The observations of the SC that the recommendations of the GST Council are not binding on the Governments, is not laying down any new law.

[5/20, 08:26] Tax Natarajam: SC Ruling on Ocean Freight
On GST Council’s powers.
 The observations of the SC that the recommendations of the GST Council are not binding on the Governments, is not laying down any new law.
 Article 279A (4) of the Constitution clearly says that GST Council plays only a recommendatory role.
 So fall all decisions of the GST Council (except once) have been taken on the basis of consensus, which shows the maturity of our Co-operative federalism.
 The SC has to make the above observation, in view of one of the arguments raised by the Government in the matter that once the GST council has recommended levy of GST on Ocean Freight on CIF imports from the importers, the same can be implemented by the executive through notifications, even though the GST Acts are not amended in this regard.
On the issue of Ocean Freight.
 The Controversy before the SC was only with regard to levy of GST on CIF transactions, from the importers.
 The levy of GST on FOB imports (which would be paid by the Shipping line in case of Indian shipping lines and which would be paid by the importer under reverse charge if the shipping line is outside India) continue to be valid.
 In CIF, the transportation service is provided by a foreign shipping line to the foreign supplier, but GST is payable by the importer, who is not the actual recipient of the transportation service.
 The levy of GST on CIF transactions, from the importers was introduced, purportedly to create a level playing field for Indian shipping lines.
 The various arguments raised against the levy, viz., importer cannot be the recipient of service, persons other than recipients cannot be made liable to pay GST under reverse charge, extra-territoriality of the levy, etc. have been negatived by the SC.
 The issue has been finally decided in favour of the importer on the ground that once the supplier undertakes to deliver the goods at importer’s location, the transportation arranged by him becomes a “composite supply” and the transportation component of the transaction should be subjected to GST levy only as part of the supply of goods. As supply of goods already suffers IGST on a value, which also includes the freight component , there can be no further levy of IGST by treating the transportation as a separate activity.
 Similarly, Service Tax was also levied on importers in respect of CIF imports, from 23.04.2017 which was also under challenge before the SC. Though such challenges were also heard together, this judgement does not deal with it and we can expect a separate judgement in this regard.
 As the concept of “composite supply” is not relevant under Service Tax law, we have to wait and see what would be the decision of the SC in the context of Service Tax.
[5/20, 08:57] Sekarreporter: Super
[5/20, 08:57] Sekarreporter: 💐💐👍🏼👍🏼