GST Filing & Registration Service on Export Freight

The removal of the exemption on export freight has had a big impact on both exporters and transporters. In this article, we’ll talk about the new change that has been made, how much air and ocean freight is now affected, the problems with the ITC, and the history of this exemption.

Exemption on Export Freight Update

The CBIC had already agreed that air and ocean export freight would not have to pay GST until September 30, 2022. But the exemption is no longer valid. It was supposed to be in effect until September 30, 2018, but that date was later changed to September 30, 2022.

In India, the GST for air freight is 18% and the GST for ocean freight is 5%. From October 1, 2022, exporters will have to pay GST on two services that were previously exempt.

How does the Withdrawal Exemption on Export Freight Affect Businesses

Transporters and exporters are mostly affected by the removal of the exemption. But it also hurts the finances of MSME exporters. Since the heavy freight tax makes exporting and doing business more expensive overall, it will hurt the airline, shipping, and freight forwarding industries.

Taxpayers may have trouble getting ITC on the GST they paid to the Indian Shipping Company or Airline Company on the freight amount for exporting goods, which would be a cost to the exporter and affect their working capital.

Back Story:

By Integrated Tax (rate) Notification No. 2/2018, dated January 25, 2018, the Central Board of Indirect Taxes and Customs (CBIC) had exempted services for moving goods by ship or plane from a customs station of clearance in India to a place outside India.

The exception was announced with a clause that said it would end on September 30, 2018, and it was true until then.

This exemption was later extended several times through GST Notification No. 15/2018 (Rate), Notification No. 09/2017 (Rate), and Notification No. 20/2019 (Rate), and it lasted until September 30, 2022.

Note the details:

When both the shipper and the person who got the goods were in India, export freight was exempt.
Exemption Notification 2/2018 from January 25, 2018: In Serial No. 20A and 20B of the Notification, IGST(Rate) exempted both air freight and ocean freight.
This notification said that services for moving goods by plane or ship from a customs station in India to a place outside India were exempt until September 30, 2018.
Notifications sent out from time to time kept the exemption in place until September 2022.
As of February 1, 2019, a proviso was added to Section 12(8) of the IGST Act to say that even if both the supplier and the recipient of the transportation service are in India, the “place of supply” would be outside India if the goods are going somewhere else.
Notification that allowed export freight to be tax-free until September 2022 was not kept.

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