🚢 Mohit Minerals Pvt Ltd vs Union of India: A Landmark Case on GST Applicability on Ocean Freight

On May 19, 2022, the Supreme Court of India delivered a significant judgment in the case of M/s Mohit Minerals Pvt Ltd vs Union of India that brought major clarity on the levy of GST on ocean freight under CIF (Cost, Insurance, and Freight) contracts.

Background of the Case:

When businesses import goods into India on a CIF basis, the supplier outside India handles and pays for the cost, insurance, and freight. The Indian importer pays a lump sum price for the goods delivered at their doorstep.

Despite the fact that IGST (Integrated Goods and Services Tax) is already paid at the time of import (calculated on the CIF value including freight and insurance), the Indian GST authorities issued notifications demanding an additional reverse charge GST on the freight component separately.

This led to double taxation on the same freight value — once under IGST at customs, and once again under RCM (Reverse Charge Mechanism) for ocean freight.

The Supreme Court’s Analysis:

The Supreme Court examined the issue from constitutional, legal, and economic perspectives:

🔹 Contractual Relationship: In CIF contracts, the Indian importer does not contract directly with the shipping line. Therefore, there is no "recipient" of shipping services in India as required under GST law.

🔹 Double Taxation: IGST already covers the freight component while calculating customs duties. Levying GST again on ocean freight would amount to taxing the same value twice, which is impermissible.

🔹 Legislative Competence: The Court pointed out that Central GST law cannot impose tax on services provided by a person located outside India to another person also located outside India.

🔹 Violation of GST Scheme: The fundamental scheme of GST is value-added taxation, not cumulative or multiple taxes on the same value.

Final Decision:

The Supreme Court struck down the levy of GST on ocean freight under RCM for CIF imports as unconstitutional and invalid.

Thus, importers are not required to pay separate GST on ocean freight if they have already paid IGST at customs on the CIF value.

Practical Impact:

• ✅ Relief for importers from unnecessary additional GST payments.

• ✅ No reverse charge on ocean freight for CIF imports.

• ✅ Focus on correct customs valuation and IGST payment at the time of import.