Ocean freight in case of export

[YATISHKUMAR AGARWAL]

Dear sir

Please advice

Case : we export goods with payment of igst and contract is for CIF basis. My query is as per following

1. We charge shipping charge in invoice whether is it composite supply ?

2. Shipping charges are subjected to igst or not

3.If shipping charges are subject to igst then whether it is export of service or not (as principal supply is cover under export of goods )

4. While filing return shipping charges should be shown as supply of service or not

5. IGSt paid on shipping charges is refundable or not

6.After 25.01.2018 whether is it exempt

[Rajagopalan Ranganathan]

Sir,

Answers for your qurries are as follows:-

Query1: Yes it is composit supply since it involves export of goods and service since as per Section 2 (30) of CGST Act, 2017 " “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply."

Query :2 Shipping charges are subject to IGST since the export of goods are on CIF basis the exporter has to bear the freight charges. Since the exporter is located in taxable territory (India) and he is bearing the freight charges, the exporter is liable to pay IGST.

Query:3 Yes.

Query:4 Yes.

Query:5 Yes, IGST paid on shipping freight is refundable since the service is an input service for export of goods.

Query: 6 Yes. As per Sl. No.19B of Notification No.12/2017 dated 28.6.2017 as amended by Notification No. 2/2018- Central Tax (Rate) dated 25.1.2018 CGST chargeable on service by way of transportation of goods by a vessel from Customs Station of clearance in India to a place outside India is Nil. Bit this exemption is available till 30.9.2018 only.

[Rajagopalan Ranganathan]

Sir,

In continuation of my reply dated 9.6.2018 I wish to sate that the nil rate is applicable for the period 25.1.2018 to 30.9.2018 only.

[Rajagopalan Ranganathan]

Sir,

In continuation of my replies dated 9.6.2017, as per Section 7 (5) (a) of IGST Act, 2017 " Supply of goods or services or both when the supplier is located in India and the place of supply is outside India shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce. Therefore export of goods or services or both will be treated as inter-state supply.

As per Sl. No. 20 B of Notification No. 9/2017-Integrated Tax (Rate) dated 28.6.2017 as amended by Notification No. 2/2018-Integrated Tax (Rate) dated 25.1.2018 IGST chargeable on service by way of transportation of goods by a vessel from Customs Station of clearance in India to a place outside India is Nil. But this exemption is available during the period 25.1.2018 to 30.9.2018 only.

AI Summary

IGST on shipping charges treated as composite supply for CIF exports, refundable though temporarily exempt by notification.
Shipping charges under CIF exports are a composite supply tied to the principal export of goods; if the exporter located in India bears freight, the sea transportation service to a place outside India is treated as an inter state supply attracting IGST, must be shown as a supply of service in returns, and IGST paid on such freight is refundable as an input service, subject to a temporary nil rate exemption afforded by specified rate notifications for a limited period.