GST of 18 per cent imposed on Outbound Export Freight

GST of 18 per cent has been imposed on Export Air Freight charged by Airlines/Freight Forwarders under SAC Code 9965 with effect from 1st July according to a Senior GST Official as GST Council did not grant exemption from GST on outbound Air Freight. The exemption was granted by GST Council only in case of Inbound Air Freight which has already been notified vide serial no. 20 of Notification No. 9/2017-Integrated Tax(Rate) which exempts services by way of transportation of goods by an aircraft from a place outside India up to the customs station of clearance in India.

According to RS Sharma Tax Lawyer, the levy of GST of 18 per cent on Outbound Air Freight is limited to only those situations where the supplier of service(Airlines/Freight Forwarder) and the receiver of service( Exporter) who is paying for the freight both are located in India. This is result of the provisions of Section 12 of IGST Act, 2017 which provides that the Place of Supply of services by way of transportation of goods to a registered person, shall be the location of such person. Hence this is a deeming provision which has come into force. Besides in this situation the conditions for falling within “export of service” are not being fulfilled. The exporters are entitled to credit of GST paid.

Further, when the goods are being exported on “Freight To Pay ” basis; the GST will not apply as no consideration is being paid by the Exporters to Airlines/Freight Forwarders towards freight which is required to be paid directly by the buyer of goods who is deemed receiver of service.

Outbound Ocean Freight has also become subject to 5 per cent GST applying the same provisions. Concessional rate of 5 per cent GST has been notified vide Notification No.8/2017-Integrated Tax(Rate) for Transport of goods in a vessel including services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. Hence both inbound and outbound Ocean Freight are subject to 5 per cent GST. Importer is liable to pay GST under reverse charge notified vide Notification No.10/2017-IGST in case of Services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.

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