Union of India v. Mohit Minerals Pvt. Ltd.
Supreme Court on IGST for ocean freight under CIF contracts — who is the “recipient” and is there double taxation?
Quick Summary
Core idea: In a CIF import, the foreign seller hires and pays the shipper. The Indian importer does not buy the freight service. The Supreme Court held that the importer is not the “recipient” of ocean freight services for reverse charge IGST. Also, freight is already in the CIF value for customs/IGST on import—adding IGST again on freight would be double taxation.
- Notifications 8/2017 and 10/2017 were invalid for CIF ocean freight.
- Services occurred between foreign parties; territorial nexus with India was weak.
- Reverse charge needs a real recipient who pays consideration.
Issues
- Is the Indian importer under a CIF contract the “recipient” of freight services for reverse charge IGST?
- Do the impugned notifications cause double taxation since freight is part of the CIF customs valuation?
- Do the notifications exceed the scope of the IGST/CGST Acts by taxing services between foreign parties outside India?
Rules
Section 5(3), IGST Act
Reverse charge can be imposed only on the recipient of the service.
Section 2(93), CGST Act
“Recipient” is the person liable to pay consideration. In CIF, that is typically the foreign seller, not the Indian importer.
Territorial Nexus
Tax must have a clear Indian nexus. Purely foreign-to-foreign services are outside the net.
Customs Valuation (CIF)
Freight is already in the CIF value for customs and IGST on import; charging IGST again on freight duplicates tax.
Facts — Timeline
Arguments
Respondent (Assessee)
- Not the recipient of freight; no consideration paid.
- Freight already in CIF customs value; IGST on freight would be double taxation.
- Service is between foreign parties; weak territorial nexus.
Appellant (Union of India)
- Importer benefits from freight; can be treated as a deemed recipient.
- Notifications validly impose reverse charge to plug tax gaps.
Judgment
The Supreme Court upheld the Gujarat High Court. The importer under CIF is not the service recipient for ocean freight. The levy created double taxation and lacked adequate territorial nexus. The notifications were beyond the Acts and hence invalid.
Result: Union’s appeal dismissed; Notifications 8/2017 and 10/2017 cannot be applied to CIF ocean freight.
Ratio Decidendi
- Reverse charge under IGST targets the actual recipient who pays consideration.
- In CIF, the foreign seller buys the freight service; the Indian importer does not.
- Delegated legislation cannot widen charging provisions or ignore territorial limits.
Why It Matters
This case protects importers from paying IGST twice on the same freight and clarifies who counts as the recipient in cross-border services. It keeps GST aligned with real transactions and territorial limits.
Key Takeaways
- CIF importer is not the recipient of ocean freight.
- Freight already taxed within CIF customs value; no second levy.
- Notifications cannot override the IGST/CGST Acts.
Mnemonic + 3-Step Hook
Mnemonic: “CIF: Carrier Is Foreign-paid.”
- Who pays? If foreign seller pays freight → importer not recipient.
- Where is service? Foreign-to-foreign → weak nexus with India.
- Already taxed? Freight inside CIF customs value → avoid double tax.
IRAC Outline
| Issue | Can IGST be levied on the importer for ocean freight in CIF contracts via reverse charge? |
|---|---|
| Rule | Reverse charge only on the recipient (payer of consideration); tax must have territorial nexus; no duplication over CIF valuation. |
| Application | Importer did not pay for freight; service took place between foreign entities; freight already embedded in import valuation. |
| Conclusion | Levy invalid; notifications ultra vires; appeal dismissed. |
Glossary
- CIF
- Cost, Insurance & Freight included in the price; seller arranges and pays freight.
- Recipient
- Person who pays consideration for the service under GST.
- Reverse Charge
- Tax is paid by the recipient instead of the supplier.
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