With the introduction of GST in 2018, the government has extended the exemption from GST on export freight twice. The most recent extension lasted for two years and concluded on September 30, 2022. The exporters have been looking at another extension of the previously-granted exemption from the Goods and Services Tax (GST) on export freight, however the same has not been granted.
Hence, notification No. 07/2021 – Central Tax (Rate) dated 30th September 2021 has not been extended beyond 30th September 2022, which means that Export freight will now be taxable under GST.
- Services by way of transportation of goods by aircraft from India to a place outside India.
- Services by way of transportation of goods by a vessel from India to a place outside India.
Going forward, all invoices raised for customers in India on or after 1st October 2022 will include:
- 5% GST on export ocean freight
- 18% GST on export air freight
Additionally, in the case of outbound shipments where both the parties i.e., the location of supplier and recipient is in India, the place of supply shall be determined as per Section 12(8) of the Integrated Goods and Services Tax Act 2017 (IGST Act). With effect from 1st February 2019, a new proviso has been inserted in Section 12 (8) of the IGST Act that states, “Provided that where the transportation of goods is to be placed outside India, the place of supply shall be the place of destination of such goods”. So as per the proviso of Section 12 (8) read with section 7(5) of the IGST Act, the supply will be subject to IGST with the place of supply as 97- Other territories.
Based on the above provisions, it may be pertinent to note that IGST shall be charged on all outbound freight transactions when billed to Indian customers, considering the place of supply as 97 (i.e., Other Territory) with effect from 01st October 2022.
For any queries or concerns regarding this change, please connect with the 20Cube representative you are in touch with.