Exporter not liable for GST on export freight charges under CIF terms, shipping line must pay CGST/SGST

The AAR-TN ruled that an exporter undertaking CIF exports is not liable to pay GST on export freight charges. The GST liability rests with the shipping line/freight forwarder having an office in Thoothukudi, who must pay CGST/SGST as it constitutes an intra-state supply. This applies after the sunset clause on ocean freight exemption expired on 30.09.2022. The export freight service is treated as input service for the exporter, eliminating their GST liability on such charges.

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Issues Involved:
1. Liability of the exporter to pay GST on export freight as CGST & SGST, or as IGST.
2. Liability of the shipping line to pay GST as CGST & SGST, or IGST.

Summary:

Issue 1: Liability of the exporter to pay GST on export freight as CGST & SGST, or as IGST

The applicant, M/s. DCW Ltd., sought an advance ruling on whether they are liable to pay GST on export freight as CGST & SGST, or as IGST. The ruling clarified that the place of supply plays a significant role in determining the taxability and nature of tax to be charged. Under the provisions of Sections 10 to 14 of the IGST Act, 2017, the place of supply for services where both supplier and recipient are in India is determined by Section 12, while Section 13 applies when either the supplier or recipient is outside India.

From 1.10.2022, the sunset clause on the exemption of GST on ocean freight and air freight on exports was not extended, making such services taxable. The place of supply for transportation of goods to a place outside India was determined as the destination of such goods, making it liable for IGST under Section 7 (5) of the IGST Act, 2017. However, from 1.10.2023, amendments changed the place of supply to the location of the recipient of services, making it an intra-state supply liable for CGST/SGST.

The ruling concluded that the exporter (M/s. DCW Ltd.) is not liable to pay GST on export freight, as the liability rests with the shipping line/freight forwarder.

Issue 2: Liability of the shipping line to pay GST as CGST & SGST, or IGST

The second query regarding the liability of the shipping line to pay GST was not answered by the Authority for Advance Ruling, as the shipping line is not the applicant in the instant case. The definition of 'advance ruling' u/s 95 (a) of the CGST Act, 2017, specifies that the ruling is provided to the applicant in relation to the supply of goods or services undertaken by the applicant.

Ruling:
1. The exporter (M/s. DCW Ltd.) is not liable to pay GST on export freight.
2. The query regarding the shipping line's liability was not answered, as the shipping line is not the applicant.

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