ISSUE:
Whether the Indian importer under a CIF (Cost, Insurance, and Freight) contract, who does not directly pay for ocean freight, can be considered the "recipient" of freight services and thus liable for IGST on a reverse charge basis.
Whether the imposition of IGST on ocean freight through Notifications Nos. 8/2017 and 10/2017 constitute double taxation, as freight costs are already included in the customs duty valuation on the CIF value.
Whether the notifications exceed the statutory scope of the IGST and CGST Acts by taxing services provided entirely outside Indian territorial jurisdiction, between foreign entities.
RULE:
Under Section 5(3) of the IGST Act, tax on a reverse charge basis can only be levied on the recipient of a supply of goods or services.
Section 2(93) of the CGST Act defines the "recipient" as the party liable to pay consideration for the service, which, in CIF contracts, is typically the foreign seller, not the Indian importer.
The Constitution of India mandates that taxation must have a clear territorial nexus with India; therefore, transactions entirely between foreign entities cannot be taxed under IGST.
Section 3 of the Customs Tariff Act includes freight costs in the customs duty valuation, implying that IGST on the same freight component would result in double taxation.