IGST is not payable under RCM for services in Free-on-Board and Cost Insurance Freight Contract

Last updated: 06 May 2024

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The Bombay High Court has ruled that Integrated Goods and Services Tax (IGST) is not payable under the Reverse Charge Mechanism (RCM) for services related to Free-on-Board (FOB) contracts. This decision follows previous rulings by the Gujarat High Court and the Supreme Court, which declared the relevant tax notification ultra vires. Consequently, the court set aside a Show Cause Notice issued to a company for non-payment of IGST on FOB contract services.

Court :
Bombay High Court

Brief :
The Hon'ble Bombay High Court in the case of M/s. Agarwal Coal Corporation Pvt. Ltd. v. Union of India [Writ Petition No. 15227 of 2023 dated March 05, 2024] set aside the Show Cause Notice issued by the Revenue Department based on the Notification No. 08/2017-Integrated Tax (Rate) dated June 28, 2017 ("the Notification") which has been held ultra vires as per the judgment of Division Bench of Hon'ble Gujarat High Court in the case of Mohit Minerals Pvt. Ltd. v. Union of India [Special Civil Application No. 726 of 2018 dated January 23, 2020] which was further affirmed by the Hon'ble Supreme Court in the case of Union of India and Anr. v. Mohit Minerals Pvt. Ltd. [Civil Appeal No. 1390 of 2022 dated May 19, 2022] ("Mohit Minerals case"). The Hon'ble High Court further held that SCN should not have been issued for payment of IGST on reverse charge basis concerning the Free-on-Board ("FOB") contract-related services as the Notification, which includes payment of IGST on reverse charge basis on services concerning Cost, Insurance, and Freight ("CIF") and FOB Contract, has been held as ultra vires.

Citation :
Writ Petition No. 15227 of 2023 dated March 05, 2024

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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