"Foreign Shipping Giants Win Rs 3,000 Crore GST Exemption for FY18 as DGGI Rescinds Tax Demand"

In a major development for international shipping companies operating in India, the Directorate General of Goods and Services Tax Intelligence (DGGI) has granted a Rs 3,000 crore GST exemption for the financial year 2017-18. This significant relief affects 18 foreign shipping firms, including major players like Maersk, Orient Overseas Container Line Ltd, and Hapag-Lloyd Mediterranean Shipping.

The exemption comes after the shipping companies collectively assured the DGGI that they had not imported any services in FY18, leading to the withdrawal of the previously issued tax demand. This decision marks a notable shift from earlier actions, where these firms were scrutinized for alleged non-payment of GST on imported services. The initial demands were based on claims that foreign shipping lines had failed to pay GST under the reverse charge mechanism for services such as aircraft rental, maintenance, and crew salaries incurred abroad.

Despite this relief, the DGGI’s investigation continues. Launched in October 2023, the probe focuses on the period from July 1, 2017, to March 2024. It aims to address concerns about GST compliance for services provided to Indian branches of foreign shipping companies and airlines. Earlier this year, in February, the DGGI had issued summonses to all foreign shipping lines operating in India, requesting detailed explanations and documentation related to their GST obligations.

This exemption for FY18 is a significant win for the shipping industry, which had faced substantial financial pressure from the tax demands. However, the tax demands for subsequent financial years remain in effect, signaling ongoing scrutiny and potential financial implications for these companies.