Supreme Court says states are NOT bound to follow GST Council recommendations (20th May, 2022)

Ankur Gupta, Practice Leader ( Indirect Tax), SW India was of the view: “The Supreme Court by setting aside the levy of IGST on Ocean freight has provided major relief for the impacted taxpayers. The Court also observed the powers of GST council stating that these are merely recommendatory in nature and not binding considering the federal tax structure of India. The only worry is now that similar to past instances, the Government might bring in a retrospective amendment in GST law to negate the SC ruling and confirm taxability of ocean freight. However, till the time amendment is proposed, companies can explore the option to claim refund of tax paid under RCM for such ocean freight services which is lying in their electronic credit ledger.” 

The spat largely pertained to two notifications issued on June 28, 2017, levying IGST on ocean freight. Subsequently, the Gujarat high court in January 2020 declared the levy ultra vires t to the IGST Act.

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