After the newly implemented GST rules in India, there was a lot of panic amongst the Freight Forwarders about its implication for export shipments.
Hence Freightify team worked hard on compiling data from various trusted sources and presenting them as FAQ's below.
What is the rate of tax on export freight when freight is prepaid in India?
What is the rate of tax on export freight when it is on collect terms?
Under Rule 13 of IGST, this kind of a transaction is not taxable.
What is the rate of tax on THC, IHC, B/L Fee’s, and other origin charges when these charges are prepaid?
What is the rate of tax on THC, IHC, B/L Fee’s, and other origin charges when these charges are on collect terms?
What are the tax rates on any charges that are not specified or where SAC codes are not present?
If line charges freight with breakup such as basic freight, BAF, CAF, etc. as a forwarder can we charge under a single head as freight?
Yes, it is preferable to do so to avoid disputes with the department later.
Should we merge all origin charges such as THC, IHC, B/L Fee, etc into freight and show a single head as freight or lump sum freight or all in charges?
This is not advisable as some lines have issued advisories that tax rate will be 18% in such case. Therefore, it would be better to show freight and other charges separately.
GST is not applicable for export freight collect shipments where freight is collected by my overseas agent at the destination but is GST applicable when I raise my invoice on my overseas agent for freight or for my share of the freight that was due to me? Also, at what rate can it be charged?
No, under Rule 13 of IGST law, if the place of supply of service lies outside India GST is not applicable.
If I handle ex-works export shipment then are charges such as THC, B/L Fee, Customs clearance done in India? Will transport in India, etc. be taxable? Am I supposed to charge my agent tax along with the charges?
The government is concerned with revenue, whether you charge your agent and pay or whether you pay out of your pocket it does not matter. As a freight forwarder we have to sensitize our agents to the new taxes, nevertheless, if your overseas agent is reluctant to pay GST, then you have to pay out of your earnings so it’s better to incorporate the GST component in your ex-works charges that you quote to your agents.
If GST is applicable on prepaid freight and not applicable on collect freight does this mean that more and more shipments will become FOB?
Yes, as forwarders speak to your respective associations to find a workable solution and push them to make representations to the government so that situation is reversed.
Is GST applicable on export door delivery shipments if the charges are prepaid in India by the shipper? What is the rate of tax?
Yes, GST is applicable on export door delivery charges at the rate of 18% if these charges are paid in India.
Is GST applicable on export door delivery shipments if the charges are on a collect basis and collected by my agent overseas?
No, as per IGST rule 13, this transaction is not taxable.
As a freight forwarder, how should I decide if I should charge IGST or SGST/CGST?
The main criteria to decide the applicability of IGST vs SGST/CGST on my invoices raised for Indian customers is the location of the recipient of service. If the recipient of services is in the same state as you are, you have to charge SGST/CGST if the recipient is in a different state, you have to charge IGST.
If I use the services of a GTA, am I supposed to pay GST under reverse charge? At what rate? Can I claim ITC on the tax paid?
Yes, if you use services of GTA for road transport, GST is payable under reverse charge. You can claim the ITC paid in the next month after paying the tax to the government.
If I am not a GTA and provide services of road transport to my customer, what GST should I charge my customers?
If I am not a GTA and provide services of road transport to my customer, can I ask my customer to pay under reverse charge?
No, under such circumstances you cannot ask your customer to pay under reverse charge, it must be under forward charge only.
When tax is payable under reverse charge does my tax invoice have to show that customer/recipient of service must pay tax under reverse charge?
Yes, your tax invoice must always show whether the tax is payable under reverse charge.
If my branch office in Delhi (permanent establishment), services customers in Delhi and North India but shipments are from Mumbai, can I choose to not to raise invoices from my Delhi branch on my Delhi customers and instead centralize my billing at my head office in Mumbai?
No, you cannot centralize your billing in your head office or branch office, you must have a state wise registration with separate GSTIN numbers for each state. If you have a full-fledged branch office in Delhi that services Delhi customers then invoices must be raised by your Delhi office for your Delhi customers. Your Mumbai office, in turn, has to raise an invoice on your Delhi office for services supplied by the Mumbai office to the Delhi office.
Alternatively, your Mumbai office is free to raise once a month, a consolidated statement for services supplied by the Mumbai office to the Delhi office throughout the month.
Your Mumbai office will get to consume the ITC on invoices raised by service providers in Mumbai for freight, THC, etc.
Your Delhi office will get to use the ITC on invoices raised by its Mumbai office, in other words, every branch office in a different state than yours must be treated as a vendor.
If I have only one office in Maharashtra, is it mandatory for me to have an office/branch office to handle shipments from let’s say Chennai?
If you have an office only in one state, it is not mandatory for you to have a branch office in Tamil Nadu to handle shipments from Chennai. Out of your Maharashtra office, you are free to handle shipments out of any location in India. If the shipment is from Chennai but your customer is located in the same state as you are, i.e. Maharashtra then you have to charge SGST/CGST. If the shipment is from Chennai and your customer is located in Tamil Nadu and you are located in Maharashtra then you have to charge IGST.
For import shipments if CFS raises an invoice on the customs broker instead of the importer and the customs broker or importer makes payment to the CFS, can this be treated as pure agent concept? Will the importer be allowed to claim ITC?
No, the importer will not be allowed to claim ITC in this situation. If the CFS raises an invoice on the customs broker, then the customs broker, in turn, must raise an invoice on the importer for the same service.
Is there a concept of pure agent/disbursement under GST regime?
Yes, there is pure agent concept in GST, in the previous example, customs broker must ask the CFS, shipping line, etc. to make the invoice in the name or the importer. Customs broker can pay on behalf of the importer and importer will be able to use the ITC. Since the invoice of the CFS, shipping line, etc., is in the name of the importer, the customs broker cannot claim ITC on this transaction.
It is advisable that you obtain an authorization letter from your customer (once every year) authorizing you to customs clearance, transport, pay shipping lines, etc., on their behalf.
Are cash expenses, sundry expenses, operations vouchers, sundries paid to operations staff on per job basis, taxable? Are conveyances paid to operations staff to go from one CFS to another CFS taxable? Are labor charges, carting charges, loading/unloading charges paid in cash taxable? Is ITC available on these expenses?
Yes, every transaction is taxable. Cash expenses, customs sundries, operations sundries, labor charges, loading/unloading expenses, operations conveyance, etc, all such expenses are taxable. If the conveyance you give to your staff is a part of salary (appears as a break-up of salary) then they are not taxable but if they are not part of the salary, then all such expenses are taxable. Every company has to maintain an inward supply register for all transactions with unregistered vendors including for cash expenses, sundries, operations sundries, etc. Please speak to your consultant for further details.
Are transactions with unregistered vendors taxable even if the value of the transaction is less than INR 200?
Yes, even if the transaction is less than INR 200, it is taxable, you have to generate a self-invoice for all such transaction on a daily basis. This means that you as a company, have to raise an invoice on yourself.
What is the rate of tax on commissions, FAC’s, rebate bills, minus rates, etc?
Are cash transactions with stationery suppliers, snack stalls, etc. taxable?
If we have transactions with registered vendors who have opted for the composition scheme, is tax payable under reverse charge by us?
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