Union of India & Anr v. Mohit Minerals Pvt. Ltd. (2022)

Issues

• Do CGST and IGST apply to ocean freight under RCM for CIF imports?

Rules

Rule stated: CGST Act, 2017 and IGST Act, 2017 do not apply to ocean freight under RCM for CIF imports.

RCM scope: Reverse charge applies only to services provided in India; freight service here did not fall within that charge for CIF arrangements.

Arguments

Judgment

The Supreme Court held that the RCM levy on ocean freight in CIF imports was invalid. CGST/IGST did not apply to such freight. The 2017 notifications that imposed GST on ocean freight under RCM were declared unconstitutional and ultra vires the Acts.

Ratio Decidendi

RCM is limited to services provided in India and within statutory limits. Ocean freight in CIF imports did not fall within that charge; thus, no GST under CGST/IGST.

Why It Matters

• Confirms that CIF freight cannot be taxed again under RCM.
• Gives clarity to importers on GST treatment of ocean freight.
• Reduces landed cost for businesses using CIF contracts.

Key Takeaways

1. No GST under RCM on ocean freight in CIF imports.
2. 2017 notifications were ultra vires and struck down.
3. Decision limited to CIF; FOB and others may vary.

Mnemonic + 3-Step Hook

Mnemonic: “CIF? No RCM on Freight.”

• Step 1: Identify contract type: CIF vs FOB.
• Step 2: For CIF, freight under RCM is not leviable.
• Step 3: Check notifications—must stay within the Acts.

IRAC Outline

Issue: Whether CGST/IGST can levy GST on ocean freight under RCM for CIF imports.

Rule: CGST/IGST do not apply to such freight; RCM limited to services provided in India.

Application: Importer on CIF; freight service not taxable under RCM; notifications exceeded the Acts.

Conclusion: RCM levy on ocean freight in CIF imports is invalid.

Glossary

CIF

Cost, Insurance and Freight included in the price paid by the buyer.

RCM

Reverse Charge Mechanism—recipient pays GST instead of the supplier.

Ultra Vires

Beyond the legal power granted by the statute.

FAQs

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