Mohit Minerals Case Summary: Supreme Court Ruling on GST Ocean Freight (2022)

Mohit Minerals Case Summary: The Goods and Services Tax (GST) regime was introduced to create a unified tax system in India. However, its implementation also led to disputes, particularly in import transactions. One of the most debated issues was the levy of Integrated Goods and Services Tax (IGST) on ocean freight under the Reverse Charge Mechanism (RCM) in cases of CIF (Cost, Insurance, and Freight) imports.

In a CIF contract, the foreign exporter arranges transportation of goods to India and contracts with a foreign shipping line. The Indian importer pays customs duty and IGST on the CIF value at the port of entry, which already includes the cost of goods, freight, and insurance. Despite this, the Government issued:

• Notification No. 8/2017-IT (Rate), dated 28.06.2017 – imposing IGST at 5% on ocean freight services.
• Notification No. 10/2017-IT (Rate), dated 28.06.2017 – making the Indian importer liable to pay IGST under RCM, even though the freight contract was between two foreign parties.

This led to double taxation:

• IGST already levied on CIF value (goods + freight + insurance).
• Additional IGST levied separately on freight under RCM.

The levy was challenged before the Gujarat High Court, which struck it down as unconstitutional. The Union of India appealed to the Supreme Court.

Facts of the Case

• Petitioner: Union of India & Anr. (challenging Gujarat High Court ruling)
• Respondent: Mohit Minerals Pvt. Ltd. (importer)
• Key Dispute: Whether IGST can be levied separately on ocean freight in CIF imports through RCM.

Revenue’s Stand

• Levy ensures parity between Indian and foreign shipping lines.
• No real burden on importers, since ITC of IGST under RCM could be availed.
• Recommendations of the GST Council are binding and must be followed.

Assessee’s Stand

• Double taxation: Freight already included in CIF value on which IGST is charged at customs.
• Importer is not the recipient of freight service – the recipient is the foreign exporter.
• The service of transporting goods occurs outside India between two foreign parties, lacking territorial nexus.
• Notifications were ultra vires Section 5(3) of the IGST Act, which allows tax on the “recipient” of service – not a third party like the importer.
• GST law recognizes composite supply (Section 2(30) & Section 8, CGST Act). In CIF contracts, goods + freight + insurance are a single supply and cannot be split for separate taxation.

Supreme Court Judgment (2022)

The Supreme Court upheld the Gujarat High Court decision and ruled in favor of Mohit Minerals Pvt. Ltd.

Key Findings

1. No separate IGST on ocean freight under RCM in CIF contracts – importers already pay IGST on CIF value at customs.
2. Levying IGST again on freight violates the principle of composite supply under Section 8 of the CGST Act.
3. The recipient of freight service is the foreign exporter, not the Indian importer.
4. GST Council recommendations are advisory, not binding on Parliament and State Legislatures.
5. Notifications imposing this levy were ultra vires the IGST Act and could not override statutory provisions.

Thus, the Court struck down the levy of IGST on ocean freight under RCM for CIF imports.

Practical Impact on Businesses

The judgment provided significant relief to Indian businesses:

• No double taxation: Importers are not required to pay IGST twice on freight.
• Cost savings: Especially beneficial for import-heavy sectors like coal, petroleum, chemicals, and bulk commodities.
• Compliance relief: Importers pay IGST only once – at customs clearance on CIF value.
• Clarity on constitutional principles: Taxpayer rights safeguarded from arbitrary levy.
• Reinforcement of fiscal federalism: Clear definition of the advisory role of the GST Council.

Key Takeaways

• Ocean freight in CIF imports is not taxable under RCM – IGST is payable only once on CIF value.
• Importers are not recipients of freight services in CIF contracts.
• GST Council’s role is recommendatory, not binding.
• Judgment upholds GST as a non-cascading, fair tax system.

Why This Case Matters

The Mohit Minerals ruling is one of the most significant GST judgments in India. It settled years of uncertainty around ocean freight taxation and reaffirmed core GST principles:

• Avoidance of double taxation.
• Recognition of composite supply.
• Protection of federal structure and taxpayer rights.

For Indian importers, the judgment brought much-needed certainty and financial relief, ensuring that GST continues to align with its vision of “One Nation, One Tax.”