Debit / Credit Notes-Container Detention Charges

[Asked by Guest]

One foreign supplier will compensate us towards container detention charges. Should we require to raise Debit Note or They will raise Credit Note. Any Tax -customs duty impact with HSN code.

Please guide

Rgds

[YAGAY and SUN]

In our view, it is the supplier responsibility to issue a credit note. Further,if such reimbursement is incorporated in the agreement then no customs duty will be paid by you on such receipt.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Yagay.

Many thanks Sirs for guidance

One point is not clear- Why there will be customs duty on compensation amount (towards detention cost of container beyond 5 days free time). Based on Shipping Line's claims, Foreign exporter will issue credit note on Indian importer and remit the amount by TT mode. Here how Customs Dept will fit in to . They will not come to know about this commercial decision. there could be income tax / GSt issue -that you may please guide me. Rgds

[KASTURI SETHI]

Compensation is not income.

AI Summary

Reimbursement of detention charges: supplier should issue a credit note and no customs duty arises if contract provides.
Forum guidance: the foreign supplier should issue a credit note for reimbursement of container detention charges; if such reimbursement is incorporated in the contract, no customs duty arises on receipt. The matter raises separate GST and income tax questions; one contributor stated the compensation is not income.