GST on export ocean freight

[Kaustubh Karandikar]

XYZ is in the business of ‘Logistic Support’ for Export and Import consignments. For this purpose, they hire the services of clearing and forwarding agents and agents who are supplying shipping line services. For export consignments, the amount charged by the clearing and forwarding agent towards clearing the goods are in turn recovered by XYZ from his clients with mark up and paying GST on it. However, in case of Ocean freight paid to agent who is arranging the shipping line, XYZ though recovering the ocean freight from the client with mark up, but not charging GST on it being exempted. Is XYZ right in not charging GST?

[Amit Agrawal]

Sir, kindly clarify which exemption-entry this query relates too.

[Amit Agrawal]

If we are talking about exemption vide entry no. 19B of Notification No. 12/2017- Central Tax (Rate) (as amended from time to time), answering to following points seems relevant to determine asked issue:

A. Does contract/s / agreement/s by XYZ with its customer/s (read as whole) is for a one / singular supply of comprehensive logistic support wherein each element of pricing is purely to arrive as 'consideration' for such one / singular supply?

A1. And if is for one / singular supply, is this supply can be called composite supply or mixed supply (this is largely dependent of trade-practices and understanding of trade in common parlance)"?

OR

B. Does contract / agreement by XYZ with its customer/s is for multiple, separate and independent supplies wherein subject ocean freight supply is one of such 'multiple, separate and independent supplies'?

B1. And if this is true, is contract/s / agreement/s - read as a whole - can be called as 'composite supply' (this is largely dependent of trade-practices and understanding of trade in common parlance) and if yes, what is 'principal supply' therein and its tax-status?

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Para A1 of my last post should be read as follows: And if is for one / singular supply, is this supply can be called composite supply or mixed supply (this is largely dependent of trade-practices and understanding of trade in common parlance)"? And if it is a 'composite supply' therein, what is 'principal supply' therein and its tax-status?

[Kaustubh Karandikar]

Thanks Amit Sir for your kind advice as always.

[Kaustubh Karandikar]

Amit Sir, As per Sr. No. 20B of Notification No. 9/2017-Integrated Tax (Rate) dt. 28.06.2017 as amended, Services by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India, will attract ‘Nil’ GST and will fall under SAC Code: 9965.

[Amit Agrawal]

Sr. No. 20B of Notification No. 9/2017-Integrated Tax (Rate) dt. 28.06.2017 is replica of exemption-entry presumed by me in earlier post at serial No. 2.

As explained, answer to your query is based on actual reading of contract/s or agreement/s as well as trade practices / understanding of trade in common parlance etc. to decide if these are composite / mixed / independent supplies.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

Export ocean freight exemption may apply but tax depends on whether services are treated as separate or principal supply. Export ocean freight may be nil-rated under the exemption for transportation of goods by vessel to a place outside India (SAC 9965); whether GST must be charged turns on contractual characterisation. If ocean freight is a separate, independent supply the exemption applies to that element. If the contract creates a composite supply, the tax status depends on the principal supply as determined by contract terms and trade practice.