Invoice to exporter for local clearing charges - Whether to charge IGST or CGST+SGST?

[Balaji Srinivasamurthy]

Dear experts,

I humbly seek your opinion as to how the GST to be charged for the local clearing, handling and transport charges to the exporter in case of DAP (Delivered At Place) shipment - whether the forwarding agent to bill with CGST+SGST (since goods are delivered in India) is or IGST (since recipient of services is outside India)?

Many thanks in advance for your support!

Regards,

Balaji

[Sadanand Bulbule]

If you raise invoice to Indian exporter (GSTIN in India) ? charge GST (CGST+SGST or IGST as applicable).

If you raise invoice to a foreign buyer/exporter (outside India) with payment in foreign currency ? it is Export of Service (zero-rated) ? no GST (supply covered under LUT/Bond).

Reference: Sec. 2(6), Sec. 12 & 13 of IGST Act, 2017; CBIC Circular No. 159/15/2021-GST.

[Balaji Srinivasamurthy]

Respected sir,

Many thanks for your reply!

May I seek further input on the below...

Considering the Notification 28/2023-CT dt 31.07.2023 read with Section 162 of the Finance Act 2023, is it correct to say that, in case of transportation of goods other than by mail or courier, the place of supply would be covered under the default provision of Section 13(2) instead of Section 13(9) of IGST Act, which is location of the recipient of service?

In this case, the exporter (as per DAP incoterm) being the recipient of service and location of the delivery of goods (to the consignee within India), can the supplier of service (i.e., the forwarding agent) raise the invoice with IGST to the exporter in foreign currency?

[Sadanand Bulbule]

After 01.10.2023 (Notification 28/2023-CT), Section stands 13(9) omitted. So place of supply for goods transport falls Sec. 13(2), i.e. location of recipient.

• If recipient is Indian exporter (GSTIN in India) ? GST payable (CGST+SGST/IGST).
• If recipient is foreign entity (outside India, forex payment) ? qualifies as export of service, zero-rated (no GST).

 

[Shilpi Jain]

In your query I see that the recipient is outside India. 

Though the services are clearing handling and transportation. One needs to first see if all of this can be regarded merely as transportation services?

This requires analysis of section 13(3) of IGST Act as well to identify the place of supply keeping in mind the actual transaction and agreement.

[Balaji Srinivasamurthy]

Respected madam,

Many thanks for your reply!

The agreement is for engagement of both clearing and forwarding of goods from an Indian port to the customers factory in India (cannot be regarded as transportation services as such). However, as mentioned in my previous messages, as per DAP term, the exporter to bear the cost until the goods are delivered to the factory of the customer.

I am quite perplexed whether general provision of Section 13(2) will apply or whether we need to invoke provision of Section 13(3) of IGST Act.

Firstly, taking the case of Section 13(3), POS shall be the location where the services are actually performed, which is done in India and in this case CGST+SGST to be billed to the exporter. On the other hand, if Section 13(2) is applied, POS is the location of the recipient, where invoice to be raised to exporter with IGST/ zero-rated (LUT).

I seek an opinion to clear this ambiguity.

[Balaji Srinivasamurthy]

Dear experts,

Requesting your valuable opinion on this matter please...

AI Summary

Place of supply rules determine whether clearing and handling charges are zero-rated exports or taxable domestic supplies. Taxation of local clearing, handling and transport charges hinges on place of supply and recipient location: if the recipient is an Indian-registered person the supply is taxable domestically (CGST+SGST or IGST as applicable); if the recipient is located outside and payment is in foreign exchange the supply qualifies as export of services and is zero-rated, subject to export compliance. Characterisation of the service as transportation or a composite clearing/forwarding service and the rule determining where services are performed must be examined because that can change the tax treatment.