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91 The respondents have alleged that the importer cannot be validly termed as a taxable person. However, this argument has to fail on a close reading of the impugned notifications alongside Sections 2(107) and 24 of the CGST Act. Section 24(iii) of the CGST Act mandates persons required to pay tax under reverse charge to be compulsorily registered under the CGST Act. Section 2(107) of the CGST Act defines a “taxable person” to mean a person who is registered or liable to be registered under Section 24 of the CGST Act. Neither Section 2(107) nor Section 24 of the CGST Act qualify the imposition of reverse charge on a “recipient of service” and broadly impose it on “the persons who are required to pay tax under reverse charge”. Since the impugned notification 10/2017 identifies the importer as the recipient liable to pay tax on a reverse charge basis under Section 5(3) of the IGST AIR 1981 SC 972 PART D Act, the argument of the failure to identify a specific person who is liable to pay tax does not stand.

(4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.

[…]” (emphasis supplied) 101 Section 7 of the CGST Act defines the term “supply” with a broad brush and provides for an inclusive definition. Section 7(1)(b) of the CGST Act considers import of services for a consideration to constitute “supply”. Section 7(1)(c) of the CGST Act captures any and all activities in Schedule 1 of the CGST Act, irrespective of whether they are made for a consideration. Additionally, Section 7(3) confers the power on the Central Government to specify which transactions are to be treated as a supply of goods and not a supply of services, and vice-versa. Section 7(4) of the IGST Act states that supply of services imported into India would be considered as a supply of services in the course of “inter-State trade or commerce”. Thus, an Indian importer could also be considered as an importer of the service of shipping which is liable to IGST on inter-state supply, if the activity falls within the definition of “import of service” for the IGST Act and CGST Act.

104 The respondents argued that since Section 7(1)(b) of the CGST Act does not define “supply” of import of service without consideration, other than the ones specified in Schedule 1, this would be inapplicable to importers with CIF contracts as the consideration is paid by the exporter. Thus, the importer of goods cannot be said to be an importer of shipping service since the latter is not an import of service for a consideration under Section 7(1)(b) of the CGST Act. However, this argument PART D misses out on some crucial definitions. The term ‘supply’ has been defined in the IGST Act with reference to the CGST Act. Thus, the three conditions for “import of services” under Section 2(11)(iii) must be understood with reference to the provisions of the CGST and IGST Acts, including the provisions for determination of place of supply under Section 13(9) of the IGST Act. As mentioned previously, Section 13(9) of the IGST Act creates a deeming fiction of place of supply of transportation services to be in India when the destination of goods is in India. In this case, it is clear the supplier of service- the foreign shipping line - is located outside India; and the place of supply is India. Accordingly, Section 13 of the CGST Act would be applicable to determine the time of such supply. 105 The respondents have argued that the ocean freight transaction cannot be considered as “supply” since Section 7(1)(b) of the IGST act requires the import of service to be for a “consideration”. The definition of “consideration” in Section 2(31) of the CGST Act is instructive:

PART D 115 The Union Government has attempted to make a far-fetched argument that Section 24(iii) of the CGST Act mandating compulsory registration of persons liable to pay tax on a reverse charge basis extends to designating any person to pay the tax on a reverse charge basis, irrespective of their status as either a recipient or a supplier of service. This argument inverts the identification of a category of goods and services under Section 5(3) and the recipient therein, who is then liable to compulsorily register themselves under Section 24(iii) of the CGST Act. The power of the Central Government to designate persons and categories of supply for reverse charge derives from Sections 5(3) and 5(4) of the IGST Act and not Section 24(iii) of the CGST Act which mandates the compulsorily registration as a logical corollary to ensure tax collection. Section 2(98) of the CGST Act, which defines “reverse charge” reiterates that it means the “liability to pay tax by the recipient of supply of goods or services or both instead of the supplier…”. It cannot be construed to imply that any taxable person identified for payment of reverse charge would automatically become the recipient of such goods or service. The deeming fiction of treating the importer as a recipient must be found in the IGST Act. As it currently stands, Section 5(3) of the IGST Act enables the delegated legislation to create a deeming fiction on categories of supply of goods/services alone. 116 Interpreting the term “by the recipient” vis-à-vis the categories of goods and services identified in Section 5(3) of the IGST Act should necessarily be governed by the principles governing the definition of “recipient” under Section 2(93) of the CGST Act. Contrary to the arguments of the Union Government, such an PART D interpretation would not annihilate the mandate of compulsory registration under Section 24(iii) of the CGST Act. It would be applicable to suitably worded provisions in the CGST or IGST Act which permit the Central Government to identify a taxable person for a reverse charge. In any event, it would be applicable to all the recipients liable for reverse charge under Sections 5(3) and 5(4) of the IGST Act. The ineffectiveness of a tax collection mechanism under Section 24(iii) of the CGST Act cannot be argued to obfuscate the concept of a “recipient” of a good or service that is uniformly understood across the IGST Act, CGST Act and tax jurisprudence. 117 The Union Government has argued that the expression “by the recipient” in Section 5(3) of the IGST Act does not impede the authority of the GST Council in making recommendations for issuance of notifications for identifying such persons who shall be governed by reverse charge and once the identification is complete, such taxable person would automatically be interpreted as “the recipient”. This argument requires the Court to completely discard the principles of determining the recipient of a service and replace it with whichever taxable person is identified. The appellant may argue for such an interpretation to achieve a favourable outcome in this case. However, in matters of inter-state supply when the supplier and recipient are within the territory of India, this Court would have to follow this artificially bifurcated interpretation which identifies recipients vis-à-vis the nature of service and supply in some cases, and by a simple equation of the identified taxable person in others without considering the literal and contextual definition of recipient. This is against settled rules of interpretation and would be an act of judicial legislation. If PART D Parliament’s intention were to designate certain persons for reverse charge, irrespective of them being the recipient of such goods and services, it must make a suitable amendment to confer such power for exercise of delegated legislation. 118 The only argument that supports the case of the appellant is that of Section 13(9) of the IGST Act read together with Section 2(93)(c) of the CGST Act which defines a “recipient”. As noted in Section D.4.(a) above, Section 13(9) of the IGST Act creates the deeming fiction of place of supply of service to be the destination of goods when they are transported by means other than mail or courier. No specific exemptions for importers have been carved out. This Court is inclined to accept this reasoning and read it into the definition of recipient in Section 2(93) of the CGST Act which is as follows: