GST and international logistics
GST and international logistics
A major part of logistics include International Inbound and Outbound freight i.e. delivering or receving consignment from some other country. Earlier it was covered under Service tax and now it will attract GST. Provisions regarding GST are discussed below
Under GST, a place of supply of services by way of transportation of goods, including by mail or courier shall be –
(a) For a registered person, shall be the location of such person.
(b) For a person other than registered person shall be the location at which such goods are handed over for their transportation.
Thus, from the above provision it can be observed that in case the goods are being transported, place of supply shall be location of the service recipient provided it is registered. In case, service recipient is not a registered person, then the place of supply of service shall be the location where the goods are being handed over to the transporter.
Now lets us examine the implication of above provision in case of international inbound and outbound freight vis-à-vis how it is dealt in the current tax regime i.e. service tax.
International Inbound Freight –
Suppose, an Indian Customer Rajesh in Bangalore engaged a SBC logistic Shipping company of Bangalore to transport goods from UK to Bangalore.
GST regime
Case I (Indian Customer is registered) – Place of supply shall be the location of Indian customer i.e. Bangalore. Accordingly GST would be payable by Indian customer under reverse charge.
Case II (Indian Customer is not registered)– Place of supply shall be the location where the goods are being handed over to transporter i.e. UK. Accordingly, no GST is payable.
Service Tax
Under service tax, international inbound freight is chargeable to service tax under reverse charge w.e.f. 1.06.2016
International Outbound Freight –
Suppose, an Indian Customer Rajesh in Bangalore engaged a SBC logistic shipping company of Bangalore to transport goods from Bangalore to UK.
GST regime
Current Regime (Service Tax)
Case I (Indian Customer is registered) – A place of supply shall be the location of Indian customer i.e. Bangalore. Accordingly GST would be payable.
Case II (Indian Customer is not registered)– A place of supply shall be the location where the goods are being handed over to transporter i.e. Bangalore. Accordingly, GST would be payable.
Under service tax, as per rule 10 of POPS rules, place of location of service shall be the place of destination of goods i.e. UK. Therefore, no service tax is payable.
It is a well-known fact that various tax benefits are provided to exporters to make it easier for them to compete with international market where the players from the developed economies are better placed in terms of infrastructural facilities and lower cost.
In such a scenario, where on freight incurred for exports of goods, GST would be levied, it would be set back for exporters in order to compete in international markets.
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