Gujarat High Court needs Govt’s reply for FOB basis taxing on imports

AHMEDABAD : The Gujarat High Court has issued notice to the Centre seeking its response by February 1 on the incidence of double taxation faced by imports carried out on a Free on Board (FOB) basis.

A decision on the issue will have wide ramifications for crude oil, alcohol, and capital goods as a large quantum of their imports are on FOB basis as also on tax collections, experts said.

In the landmark Mohit Minerals case, the Supreme Court has already struck down Integrated Goods and Services Tax (IGST) levy on imports on a Cost, Insurance, and Freight (CIF) basis.

Importers are seeking judicial intervention for FOB contracts as well. Under the FOB mechanism, the buyer charts a vessel and pays for the freight. In contrast, the seller pays freight and insurance charges under a CIF arrangement. In this case, the petitioner, Gandhar Oil Refinery (India) Ltd, has sought the court’s intervention to end double taxation, seeking the quashing of IGST on transportation charges on the import of goods on FOB basis through a reverse charge.

“In case of FOB contracts, the valuation for imports purposes includes an element of freight as well and hence to an extent part of the value of goods is taxed twice.

Firstly, under customs, as part of the value of goods, and secondly, by way of tax on ocean freight,” said Abhishek A Rastogi, who is arguing the matter. The court has now sought the government’s response by February 1.

Source: ET