21 Feb 2018Posted By: Mudit Handa

Gujarat High Court voices against the existing legal complications in import-export trade.

International trade is not only a money-spinner for any country’s economy; it’s a conduit for interlinking of cultures. Thus, the laws governing the realm of import-export trade must be unproblematic and smooth for seamless trade and commerce across the seas. In this regard, there is always a need to amend or annul the pre-existing laws that pose a hindrance to the normal course of international trade.

Recently, the High Court of Gujarat has defied the prevailing system wherein the Integrated Good & Services Tax (IGST) is levied on the Ocean Freight in case of transmarine shipment. The court has sent notice to the Centre and has sought for repealing of this practice. As a matter of fact, the IGST is charged over the entire value of the shipment, which includes the ocean freight. Imposing the GST on the ocean freight all over again implies double-charging, which is really a cause of trouble for the traders.


With reference to the aforesaid clarification, the High Court has argued that:

  • If the GST registration assessee is paying GST on the whole value of imports; which includes the ocean freight, he can’t be levied any further tax all over again on the ocean freight, under a different notification.
  • Furthermore, the court has stated that in case of Cost Insurance and Freight (CIF) contracts, wherein a trader of goods incurs the costs, freight, and insurance charges to cover his buyer’s risk of loss or damages in the course of transit, no tax can be levied on consignor or consignee.
  • Besides, as regards the CIF contracts, the provider and recipient of the goods and services both are located beyond the territory of India, and the transaction has occurred overseas. Hence, no tax on such services can be levied. No tax can be levied on the buyer in this case even on Reverse Charge Mechanism, where GST is charged on the buyer only.
  • In case of High Sea sales that are made during the course of shipment through the bill of lading to some other buyer, the tax burden can’t be put on the importer as the importer has not yet received the service at all. Only the consignor of goods has received the services from the exporter or carrier on high seas.

All the arguments discussed above are worth consideration and must be addressed by the government.


However, the parties involved in the overseas trade can themselves ensure prevention of the legal complications during the course of shipment, by applying for Import-Export Code Registration.

If you need any support or guidance concerning online IEC Registration or you wish to get an import exports code online, feel free to contact us at 8881-069-069.

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