DEMURRAGE CHARGES & GST IMPLICATIONS

[Sadanand Bulbule]

Dear experts

Demurrage charges in sea transportation are incidental charges that arise when the consignee delays clearance/return of containers beyond the free period. Such charges are to be treated as additional consideration for the principal supply of transportation service. Accordingly, in my opinion, they are taxable at the same rate as freight in terms of Section 15(2)(c) of the CGST Act, 2017.

Many are under the misconception that such chrages are for 'tolerating an act' falling under Sl. No. Entry 5(e) of Second Schedule to the CGST Act.

Plz validate.

AI Summary

Demurrage Charges on Container Delays Are Taxable as Part of Freight Under Section 15(2)(c) CGST Act Demurrage charges incurred due to delayed clearance or return of containers in sea transportation are considered additional consideration for the principal transportation service. These charges are taxable at the same GST rate as the freight under Section 15(2)(c) of the CGST Act, 2017. The common misconception that demurrage charges fall under the category of charges for 'tolerating an act' as per Entry 5(e) of the Second Schedule to the CGST Act is incorrect.