GST on Ocean Freight in CIF Contracts: The Final Word on Double Taxation

The Legal Issue

The primary legal dispute for the 2018-19 period was whether an Indian importer, having already paid Integrated GST (IGST) on the total CIF (Cost, Insurance, and Freight) value of imported goods, can be asked to pay IGST again on the “Ocean Freight” portion under the Reverse Charge Mechanism (RCM).

Facts of the Case

The Transaction: The petitioner imported solar PV modules on a CIF basis. In a CIF contract, the foreign exporter is responsible for the freight and insurance; the price paid by the Indian importer includes these services.
The Tax Paid: Under Entry 10 of Notification 10/2017, the importer paid IGST on the ocean freight via RCM, plus interest for a slight delay.
The Refund Claim: Following the landmark Mohit Minerals judgment, the petitioner sought a refund for the tax paid in June 2019. The Department repeatedly rejected the refund, even after a High Court remand, prompting this second writ petition.
The Change in Law: Notifications 11/2023 and 13/2023 officially struck down the RCM levy on ocean freight effective from October 1, 2023.

The Decision

The High Court ruled in favour of the assessee, ordering a full refund of the IGST and interest:

Violation of Composite Supply Rules: Relying on the Gujarat High Court and Supreme Court rulings in Mohit Minerals, the court held that a CIF import is a composite supply of goods. Under Section 8 of the GST Act, the tax is levied on the entire bundle. Charging a separate tax on the “service” component (freight) of that same bundle constitutes illegal double taxation.
Ultra Vires Notification: The court affirmed that Notification 10/2017, which sought to tax the importer for a service provided by a foreign shipping line to a foreign exporter, was beyond the legislative competence of the GST Act.
Retrospective Effect of the Challenge: Although the government officially removed the levy from October 2023 via new notifications, the court clarified that this does not save past levies. Since the original notification was held to be unconstitutional, any tax collected under it for prior periods (like 2018-19) must be refunded.
Outcome: The rejection of the refund was set aside. The Revenue was directed to refund the IGST and the interest paid by the petitioner.

Key Takeaways

No RCM on CIF Ocean Freight: If you imported goods on a CIF basis between 2017 and 2023 and paid GST on ocean freight under RCM, you are legally entitled to a refund. The “double tax” argument has been upheld by the Supreme Court.
Interest is Refundable: In cases where the underlying tax levy is declared unconstitutional or illegal, any interest or penalty paid along with that tax is also refundable.
FOB vs. CIF: Note that this ruling applies specifically to CIF contracts. If you import on an FOB (Free on Board) basis, where you (the Indian importer) directly engage the shipping line, GST on freight is still applicable as a separate service.
Refund Timelines: While Section 54 usually mandates a two-year limit for refunds, courts have often allowed refunds beyond this period when the tax was collected under an unconstitutional provision (treating it as “money paid under a mistake of law”).

HIGH COURT OF MADHYA PRADESH

Arinsun Clean Energy (P.) Ltd.

State of Madhya Pradesh^*

VIVEK RUSIA and Pradeep Mittal, JJ.

WRIT PETITION No. 10484 of 2025

FEBRUARY 19, 2026

Prateek Jain, Adv. for the Petitioner. Rajvardhan Dutt Padraha, Govt. Adv. for the Respondent.

ORDER

Vivek Rusia, J. – The petitioner has filed this petition, challenging the order dated January 24, 2025, passed by the Deputy Commissioner of State Tax, Circle Rewa, whereby the refund of Integrated Tax (Rate) under the reverse charge on account of Ocean freight paid for imports made on a CIF basis has been rejected.

2. The petitioner is a company incorporated under the Companies Act, engaged in the business of generation and sale of electricity and power. The petitioner is registered with the respondent department under the provisions of the Goods and Services Tax, 2017 (GST Act). During the financial year 2018-19, the petitioner had imported goods consisting of solar photovoltaic PV modules and paid the Integrated Tax on Ocean freight in terms of Entry No. 10 of Notification No.10/2017-Integrated Tax (Rate) under the reverse charge mechanism. Since the tax was paid belatedly, the interest under Section 50 of the GST Act was also paid.

3. Later on, the petitioner filed an application for refund of the claim of Rs. 26,19,546/- and interest Rs.2,26,036/- pertaining to the month of June, 2019 by submitting a Form RFD 01.

4. According to the petitioner, initially, the High Court of Gujarat in the case of Mohit Minerals (P.) Ltd. v. Union of India GSTL 321 (Guj)/2020 SCC Online Guj 49 held that the imposition of IGST on ocean freight and deeming the importer as a person liable to pay tax was declared unconstitutional. In pursuance of the aforesaid order, the petitioner submitted all the documents to the respondents. The details are given in paragraphs 5.8 and 5.9 in the petition. Initially, vide order dated 24.07.2024, the respondent had rejected the claim of the petitioner by assigning the reason: “Application found inappropriate as per the GST law.” The petitioner approached this Court by way of Arisun Clean Energy (P) Ltd v. State of Madhya Pradesh [Writ Petition No. 38663 of 2024, dated 18-12-2024], which came to be by remanding the matter to reconsider in light of the judgment passed by the Apex Court in the case of Union of India v. Mohit Minerals (P.) Ltd GST 101/ 61 GSTL 257 (SC)/2022 (10) SCC 700. Thereafter, the petitioner submitted a detailed representation, but the respondents have rejected it vide order dated 24.01.2025. Hence, this petition is before this Court.

5. After notice, the respondents have filed the reply by submitting that:

(i)

Entry No. 10 of Notification No. 10/2017 — Integrated Tax (Rate) dated 28-06-2017, read with Notification No. 08/2017 — Integrated Tax (Rate) dated 28-06-2017 under which the petitioner had paid IGST continued to have legal force at the relevant time, i.e., prior to its deletion with effect from 01-10-2023.

(ii)

The petitioner relies on the decision of the Hon’ble Supreme Court in Mohit Minerals (P.) Ltd.(supra) to contend that the levy of IGST on CIF-ocean-freight was void and has therefore claimed a refund of the same. The answering Respondents respectfully dispute the proposition for reasons set out herein.

(iii)

The answering respondents most respectfully submit that Notifications 11/2023-Integrated Tax (Rate) and 13/2023-Integrated Tax (Rate) both being dated 26-09-2023 have been issued to align the statutory framework with the law declared by the Hon’ble Supreme Court in Mohit Minerals (P.) Ltd. (supra) These notifications, however, have been made prospectively applicable with effect from 01-10-2023, and do not confer any retrospective exemption or automatic entitlement to refund in respect of taxes paid prior to this date, which remained valid under the then-prevailing legal regime.

6. We have heard the learned counsel for the parties.

7. Admittedly, the petitioner paid the tax during the currency of Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017. The validity of the said notification was challenged before various High Courts and thereafter before the Apex Court. The Apex Court, in the case of Mohit Minerals (P.) Ltd. (supra), has not only dismissed the SLP, but also upheld the order passed by the Gujarat High Court by holding that the Indian importers are liable to pay IGST on composite supply, comprising the supply of goods and service of transportation, insurance, etc., in a CIF contract. Hence, the separate levy on them for the supply of service by a shipping line would be in violation of Section 8 of the GST Act. Therefore, in view of the aforesaid judgment, the GST is not liable to be paid on Ocean freight under the reverse charge mechanism, in the terms of Notification No.10/2017.

8. The only contention of the respondent is that after the judgment passed by the Apex Court vide notification dated 26.09.2023, the earlier Notification No.10/2017-Integrated Tax (Rate) dated 28.06.2017 has been omitted, but this notification came into force with effect from 01.10.2023. Once the Notification No.10/2017-Integrated Tax (Rate) dated 28.06.2017 has been struck down by the High Court as well as by the Supreme Court, and any amount of tax paid or recovered was not saved either by the High Court or the Supreme Court, then the same is liable to be recovered. Even if this Notification dated 26.09.2023 has been made effective from 01.10.2023, the tax and interest paid under Notification No.10/2017 are not liable to be refunded by the respondent department.

9. The number of writ petitions has been disposed of by this Court in view of the judgment passed by the Apex Court in the case of Mohit Minerals (P.) Ltd. (supra). Hence, this petition is also disposed of. The amount of tax and interest paid by the petitioner be refunded.