Merchandise exporters have to pay 18% GST on shipping costs : GST Council

NEW DELHI : Merchandise exporters will have to pay 18% goods and services tax, or GST, on the services of transportation of goods, a move that the industry says could leadtocashflowissuesatatimewhen exportsaredeclining.

This follows a recommendation of the GST Council that the place of supply of transportation of goods mustbedeterminedonthelocationof the service receiver, rather than on thebasisofdestinationofgoods.

Government officials said the move aims to provide tax parity between foreign and Indian shipping lines with regard to integrated GST on transportation of goods by vessels from India to outside India and viceversa.

Currently, the export freight rate charged by Indian shipping lines to Indian exporters is taxable while freight charged by foreign shipping linestoIndianexportersfortransport ofgoodstoaplaceoutsideIndiaisnot taxable as it is neither an inter-state noranintra-statesupply.

Experts said while the GST paid would be available as a credit to most of the exporters as they can claim a refund, this may impact their cash flow.

India’s exports contracted in January on the back of declining demandinadvancedeconomies.

“Therecentchangeintheplaceof supplyoftransportationofgoodswill removelastmileconnectivitycostsof overseasexportersandimportersfor whom this GST was in any case not creditable,”saidBipinSapra,partner,

indirecttax,EYIndia.

A specific clarification that the defaultruleisoperatingruleforPOS (place of supply) in case of not only transportation of goods butalsoforcourierandmailservices will help the industry benefit from thischange,Saprasaid.

Some experts said it will increase tax burden on certain exporter like those dealing in alcohol, which is outside ambit of GST.

“While the desired principle will provide consistency between services of transportation of goods and courier services, the proposal will lead to applicability of tax for export of goods,” said Abhishek A Rastogi, founder of lawfirmRastogiChambers.