Goods and Services Tax (GST) is a tax reform initiative that was introduced in India on July 1, 2017. It is a comprehensive tax that applies to all goods and services sold within the country. However, when it comes to international outbound freight, the application of GST can be a bit tricky.
When we talk about international outbound freight, we are referring to shipments that leave India and are exported to other countries. The transportation of these goods can be done through different modes- air freight, ocean freight, or a combination of both. The GST on international outbound freight varies depending on the mode of transportation.
When it comes to ocean freight, the GST is levied on the ocean freight charges that the exporter pays to the shipping line. This tax is applicable regardless of whether the exporter is registered under GST or not. The rate of GST on ocean freight is 5% and it comes under the category of 'IGST on Export of Services'.
It's important to note that this tax is not applicable on the value of the goods being exported, but only on the ocean freight charges. Additionally, the exporter can claim a refund of the GST paid on the ocean freight charges if they have not utilized the input tax credit against other GST liabilities.
When it comes to air freight, the GST is levied on the total value of the air freight charges that the exporter pays to the airline. The rate of GST on air freight is 18% and it comes under the category of 'IGST on Export of Services'. Similar to ocean freight, this tax is also applicable regardless of whether the exporter is registered under GST or not.
It's important to note that the GST on air freight is applicable only on the transportation of goods that are exported. If an exporter is importing goods into India, they will have to pay GST on the value of the imported goods under the 'IGST on Import of Goods' category.
The implementation of GST has had a mixed impact on the international outbound freight industry in India. On one hand, the single tax system has simplified the tax structure and reduced the number of taxes that exporters have to pay. On the other hand, the increase in the rate of GST on air freight has led to an increase in the cost of exporting goods.
Additionally, the process of claiming a refund for the GST paid on the ocean freight charges can be cumbersome and time-consuming. This has led to some exporters opting to pay the tax instead of claiming a refund.
Overall, GST on international outbound freight can be a bit confusing, but understanding the tax structure can help make the process easier. It's important for exporters to stay up-to-date with any changes in the tax structure and to consult with a tax expert if necessary.
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