This decision offers relief to major international shipping lines, including Maersk, Orient Overseas Container Line Ltd, and Hapag Lloyd Mediterranean Shipping, which had received notices for the non-payment of goods and services tax (GST) on the import of services starting from July 2017.

The tax demand was rescinded after the shipping companies provided a joint undertaking affirming that no import of services occurred during the 2017-18 period, the sources said.

However, the tax demand for subsequent years remains in place, they added.

The DGGI initiated an investigation in October 2023 into allegations that the branch offices of foreign shipping companies and airlines in India had failed to pay GST under the reverse charge mechanism for services such as rentals, aircraft maintenance, and salaries paid to crew members abroad.

The agency requested detailed clarifications from these companies and raised tax demands for the period from July 1, 2017, to March 2024. In February 2024, the DGGI also issued summonses to all foreign shipping lines operating in India.

Following the summonses from the DGGI Ahmedabad and DGGI Mumbai offices, these companies collectively approached the Finance Ministry, providing a detailed breakdown of their import of services to the DGGI.

"This exemption applies solely to the financial year 2017-18 and does not extend to subsequent years, for which investigations are ongoing," said one official, who requested anonymity.

The GST Council's fitment committee will decide on the potential exemption for future years and whether the import of services by these companies should be subject to taxation.

"In the last meeting, a general circular was issued that exempted certain services, but shipping and airlines were not included," the official noted. (ET)