Export Freight GST exemption withdrawn – Should an exporter hire a foreign shipping line?

Since the exemption of export freight from Goods and Services Tax (GST) was withdrawn, Indian exporters are facing a tough time. The exemption was withdrawn to improve the competitiveness of India’s shipping industry, which has been losing business to foreign shipping lines.

Now, the question that arises is whether Indian exporters should hire foreign shipping lines or not. In this article, we will discuss this issue in detail.

What is the problem?

Earlier, Indian exporters were exempted from paying GST on export freight. However, this exemption was withdrawn in October 2020. As a result, exporters now have to pay GST on export freight, which has increased their costs.

The government withdrew this exemption to encourage the use of Indian shipping lines. However, this has not been successful as Indian shipping lines are not able to compete with foreign shipping lines on cost and efficiency.

Should Indian exporters hire foreign shipping lines?

The answer to this question depends on various factors such as the nature of the goods being exported, the destination, and the volume of exports.

Nature of the goods

If the goods being exported are of high value and are perishable, it is advisable to hire a foreign shipping line. Foreign shipping lines have better infrastructure and equipment to handle such goods. They also have better tracking systems and can provide better security to the goods.

Destination

If the destination is a country where Indian shipping lines do not have a presence or have limited presence, it is better to hire a foreign shipping line. Foreign shipping lines have a wider network and can deliver goods to remote locations as well.

Volume of exports

If the volume of exports is high, it is better to negotiate with foreign shipping lines for better rates. Foreign shipping lines offer volume discounts and other benefits to regular customers.

Conclusion

Indian exporters should explore all options before deciding whether to hire a foreign shipping line or not. They should consider the nature of the goods, the destination, and the volume of exports before making a decision. However, it is important to note that Indian shipping lines should be encouraged and supported to improve their competitiveness.