India’s air cargo market is worried as forwarders face an 18% tax on exports

After the 18% GST (Goods and Service Tax) imposition on the export freight charges, Indian air freight forwarders are experiencing cash flow constraints amidst the growth challenges. The GST was implemented in July 2017, but till September 31, 2022, it was not included in export transactions, however, from October 1, 2022, the exemption has not been extended.

Now the forwarding community must submit taxes on shipments handled or pay penalties. The exporters are worried as it can pose an enormous financial burden on freight intermediaries because most contracts are worked around credit arrangements specifically in high-volume cases. In the case of GST, the money has to be deposited into the GST account even before the money is received from the clients, and due to that, it may hurt the trade.

The APEC (Apparel Export Promotion Council) chairman, Naren Goenka stated that GST has brought in serious concerns among the exporters and exporter groups as they feel that already the air freight is high when compared to sea freight and with international buyers delaying accepting orders, the inventory cost for holding export consignments are also increasing. He further said that although they have appealed to the govt. to look into the issues they have put forth, the government has yet to respond positively to the petitions. In the meantime, the surged chartered air cargo flights departing from India have been met with concerns due to the low demand. The carriers are looking at significant price rise pressure from the slowing market and GST is also a financial burden.