EXPORT FREIGHT TAXABLE FROM 01-10-2022 Natarajan Advocate, G N Law Associates

EXPORT FREIGHT TAXABLE FROM 01-10-2022

Exemption from payment of GST for the services of transportation of goods by vessel or aircraft, from any Indian Port / Airport to a foreign Port / Airport, which was extended from time to time, has not been extended after 30.09.2022. Hence, transportation of export consignments by Vessel / Aircraft becomes liable to GST from 01.10.2022. If the shipping lines / airlines are based in India, they will charge GST under forward charge.

Rate of GST would be,

If no ITC is availed by shipping line      : 5 %

If ITC is availed by shipping line            : 18 %

Transportation of goods by aircraft   : 18 %

03/06 The taxability of import freight and export freight in different circumstances is tabulated below for better understanding.

Import Transportation.

SL.NO Location of Shipping Line Freight

Terms

Location of service recipient & Place of Supply Taxability Remarks
FOB India [Importer] POS – India [Destination of goods – Proviso to Sec.12(8) of the IGST Act] Leviable to GST under forward charge in the hands of the shipping line  
2  
3 Outside India FOB India (Importer) POS – India [Destination of goods – Proviso to Sec.13(9) of the IGST Act] Import of service
4 Outside India CIF Outside India (Exporter) POS – Not determinable. But considering importer as recipient POS was considered as India, as per Sec.13 (9) of the IGST Act. Leviable to GST under reverse charge in the hands of the importer.

 

04/06 Export Transportation.

SL.NO Location of Shipping Line Freight

Terms

Location of service recipient & Place of Supply Taxability Remarks
FOB Outside India (Importer) POS – Outside India

[Destination of goods as per Sec. 13 (9) of IGST Act]

It will qualify as Export of

Service

 
2 Exemption not extended beyond 01.10.2022 and hence taxable from

01.10.2022

3 Outside India FOB Outside India (Importer) POS – Not determinable.
4 Outside India CIF India (Exporter) POS –

Outside India [Destination of goods as per Sec. 13 (9)

of IGST Act]

Not at all taxable, as it is not import of service (Place of supply is not in India)  

Levy of GST on import freight under CIF model (where the freight is paid by the foreign exporter to a foreign shipping line) was introduced ostensibly to create a level playing field for Indian shipping lines, but that levy has been held to be invalid by the Hon’ble

Supreme Court in the case of UOI Vs Mohit Minerals

Pvt. Ltd..

05/06 Now on export freight a disparity is being created, whereby, while engaging an Indian Shipping line / airline for export would attract the levy of GST, engaging a foreign shipping line / airline would not attract the levy of GST. It may be noted that if an Indian Exporter engages a foreign shipping line / airline, it is not an import of service, as one of the conditions for qualifying as import of service is not satisfied, i.e. the place of supply is not in India (Place of supply is destination of goods which is outside India). So, hereafter, Indian Exporters would prefer a foreign shipping line foreign airline, rather than an Indian Shipping line / Indian Airline. Or they should opt for FOB exports and make the foreign importer to pay freight to the Indian Shipping line / Indian Airline, in which case it will amount to export of service in the hands of the Indian shipping line / airline and not attract the levy of GST.

(Published in www.taxindiaonline.com on 06.10.2022)

 

06/06

THANK YOU

  1. Natarajan Advocate, G N Law Associates

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