Export Freight GST exemption withdrawn – Should an exporter hire a foreign shipping line?

The Indian government has withdrawn the exemption on GST for freight charges on exports, effective from 1st August 2021. This means that GST will now be applicable on the ocean freight charges paid by exporters. In light of this change, exporters may need to reassess their shipping arrangements and consider hiring a foreign shipping line instead of an Indian shipping line.

Hiring a foreign shipping line may provide certain advantages for exporters, such as:

1. Exemption from GST on ocean freight: Foreign shipping lines are not registered under the Indian GST regime and therefore, are not liable to pay GST on the ocean freight charges. This may help reduce the overall cost of shipping for the exporter.

2. Greater flexibility in shipping schedules: Foreign shipping lines may offer more flexible shipping schedules and may be able to provide more frequent departures, allowing the exporter to meet their shipment deadlines more easily.

3. Better shipping rates: Foreign shipping lines may offer more competitive rates than Indian shipping lines, which could help reduce the overall cost of shipping for the exporter.

However, it is important to note that hiring a foreign shipping line may also come with certain risks, such as language barriers, cultural differences, and potential logistical challenges. Exporters should carefully evaluate their shipping options and consider factors such as shipping costs, transit times, and reliability before making a decision.

In summary, the withdrawal of the GST exemption on export freight charges may have an impact on exporters, and it may be worth considering the option of hiring a foreign shipping line to help reduce costs. However, it is important to carefully evaluate all the options and assess the potential risks and benefits before making a decision.

Exporters should also keep in mind the documentation requirements for hiring a foreign shipping line. As per the Indian customs regulations, exporters are required to submit a bill of lading or a sea waybill to the customs authorities as proof of shipment. In the case of a foreign shipping line, the exporter would need to ensure that the necessary documentation is in order and that the shipping line is able to provide the required documentation in a timely manner.

In addition, exporters should also be aware of any additional costs that may be associated with hiring a foreign shipping line. These costs could include customs brokerage fees, port charges, and other expenses that may be incurred due to language and logistical challenges.

To help mitigate these risks, exporters may choose to work with a customs brokerage firm or a freight forwarder that has experience working with foreign shipping lines. These professionals can help navigate the documentation and logistical requirements and may be able to negotiate better rates on behalf of the exporter.

In conclusion, the withdrawal of the GST exemption on export freight charges may prompt exporters to consider hiring foreign shipping lines as a way to reduce costs. However, exporters should carefully evaluate all the options and assess the potential risks and benefits before making a decision. They should also ensure that they have the necessary documentation and support to facilitate a smooth shipping process.

FAQs

1. What is the new GST rule regarding the exemption on export freight charges for Indian shipping lines?

Effective from 1st August 2021, the Indian government has withdrawn the exemption on GST for freight charges on exports, which means that GST will now be applicable on the ocean freight charges paid by exporters.

2. What are the advantages of hiring a foreign shipping?

Hiring a foreign shipping line may provide certain advantages for exporters, such as exemption from GST on ocean freight, greater flexibility in shipping schedules, and better shipping rates.

3. What are the potential risks of hiring a foreign shipping line for exports?

Potential risks of hiring a foreign shipping line include language barriers, cultural differences, and potential logistical challenges. Exporters should carefully evaluate their shipping options and consider factors such as shipping costs, transit times, and reliability before making a decision.

4. What documentation requirements are necessary for hiring a foreign shipping line?

Exporters are required to submit a bill of lading or a sea waybill to the customs authorities as proof of shipment. In the case of a foreign shipping line, the exporter would need to ensure that the necessary documentation is in order and that the shipping line is able to provide the required documentation in a timely manner.

5. Are there any additional costs associated with hiring a foreign shipping line?

Additional costs could include customs brokerage fees, port charges, and other expenses that may be incurred due to language and logistical challenges.

6. Should an exporter work with a customs brokerage firm or a freight forwarder to facilitate the shipping process?

Working with a customs brokerage firm or a freight forwarder that has experience working with foreign shipping lines can help mitigate risks and ensure a smooth shipping process. These professionals can help navigate the documentation and logistical requirements and may be able to negotiate better rates on behalf of the exporter.

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