GST on Custom House Agents
By: – CA.VINOD CHAURASIA
Goods and Services Tax – GST
Dated:- 29-9-2017
Introduction: This article discusses in detail about the GST taxability on Custom house Agents.
Customs House Agent means a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of section 146 of the Customs Act,1962 (52 of 1962);
General Rule
The default GST rate for services for which specific rate has not been provided by the GST Council is 18%.
Hence, 18% GST rate would be applicable for most of the supporting services in transport.
Specific Rule
* Ocean freight
Transport of goods in a vessel GST is payable @ 5% with ITC of input services
GST on Reverse Charge basis @ 5% to be paid by the importer in case services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.
If value of ocean freight is no
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n carriage (both export/import shipments) by road
18%
7
All other services
Detention, DO fee, BL fee, Container cleaning, Agency Charges, Clearance charges, EXW charges etc.
18%
GST rates on Air shipments:
Sl no
Description of Service
Charges Covered
Rate of Tax
1
Transport of goods by Air-Export
Prepaid Air Freight on exports and related surcharges and all Origin charges including clearance and billed to entity based in India
18%
2
Transport of goods by Air-Export
Prepaid Air Freight on exports billed to overseas client/ Agent
All Origin charges including clearance and billed to overseas client/Agent
0%
18%
3
Transport of goods by Air -Import
(Prepaid and collect)
Air Freight on Import
Custom Clearance Charges
Origin EXW charges
0%
18%
18%
Where's the Place of Supply of 'Transportation of goods' services under the GST law ?
* When location of both supplier & recipient is India, the place of supply of transportation of good services as
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aforesaid, it is essential to understand the various legs on transaction involved in providing freight transportation service.
Basis the origin and destination of the transaction, analysis of each transaction from point of view of GST is encapsulated below:
Inward Shipments – Shipments Coming Into India
INWARD SHIPMENT
Type of Shipment
Legs of Transactions
Scope
Taxability Under GST
Delivered Duty Paid ('DDP') (i.e Entire liability discharged by Consignor/ Seller)
a. Between Consignor and Overseas Agent ('OA')
Contract for delivery of goods from outside India to factory/ warehouse of consignee in India
Not taxable since both parties are located outside India
b. Between OA and Indian
Freight Forwarder
('Indian FF')
Contract to perform the Indian leg of shipment, on behalf
of OA and not the Consignor or
Consignee
Section 12(8)(b) of IGST Act shall apply *refer note below
Ex-Works ('EXW')
( i.e Entire liability discharged by Consignee/
Buyer)
a. Between Consig
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goods till Foreign port i.e. port of exportation)
a. Between Consignor and Foreign FF
Contract to deliver goods till the port of exportation
Not taxable since both parties are located outside India
b. Between Consignee and Indian FF
Contract for transportation of
goods from foreign port to
factory/warehouse of consignee,
including clearance and freight charges
Taxable u/s 12(8) of IGST Act
Outward Shipments – Shipments going Into India
OUTWARD SHIPMENT
Type of Shipment
Legs of Transactions
Scope
Taxability Under GST
Delivered Duty Paid ('DDP') (i.e Entire liability discharged by Consignor/ Seller)
a. Between Consignor and Indian FF
Contract for delivery of goods from India to factory/warehouse of consignee outside India
Taxable u/s 12(8) of IGST Act
b. Between Indian
FF and OA
Contract to perform the foreign leg of shipment, on behalf of FF and
not on the behalf of the Consignor or Consignee
Taxable u/s 13(9) of IGST Act. Tax liability shall be discharged
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ee-on- Board ('FOB') (Liability of Consignor to deliver the goods till Indian port i.e. port of exportation)
a. Between Consignor andIndian FF
Contract to deliver goods till the port of exportation (India)
Taxable u/s 12(8) of IGST Act
b.Between Consignee and Foreign FF
Contract for transportation of goods from Indian port to
factory/warehouse
of consignee, including clearance and freight charges
Not taxable since both parties are located outside India
*Note
In respect of transaction performed by Indian FF on behalf of OA, the services are provided to a non-resident entity which would be considered as a non-registered entity. Accordingly, the place of supply of service for unregistered entity will be location where the goods are handed over for transportation i.e. India, provided the air/ocean freight is paid by the OA.Hence, such transaction would be subject to GST.
Frequently asked questions
1) What is the rate of tax on export freight when freight is prepaid in India?
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L Fee, etc into freight and show a single head as freight or lump sum freight or all in charges?
Ans. Basic freight is taxable @ 5% & other charges are taxable @ 18% .
It may happen to be a case mixed supply as per 8 of CGST Act, So it is not advisable as that tax rate will be 18% in such case.
Therefore, it would be better to show freight and other charges separately.
8) GST is not applicable for export freight collect shipments where freight is collected by my overseas agent at the destination but is GST applicable when I raise my invoice on my overseas agent for freight or for my share of the freight that was due to me? Also, at what rate can it be charged?
Ans. No, as per section 13(9) of IGST Act, if the place of supply of service lies outside India, GST is not applicable.
9) If I handle ex-works export shipment then are charges such as THC, B/L Fee, Customs clearance done in India? Will transport in India, etc. be taxable? Am I supposed to charge my overseas agent tax alo
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ome FOB?
Ans. Yes, as forwarders speak to your respective associations to find a workable solution and push them to make representations to the government so that situation is reversed.
11) Is GST applicable on export door delivery shipments if the charges are prepaid in India by the shipper? What is the rate of tax?
Ans. Yes, GST is applicable on export door delivery charges at the rate of 18% if these charges are paid in India.
12) Is GST applicable on export door delivery shipments if the charges are on a collect basis and collected by my agent overseas?
Ans. No, as per IGST rule 13(9), this transaction is not taxable.
13) As a freight forwarder, how should I decide if I should charge IGST or SGST/CGST
Ans. The main criteria to decide the applicability of IGST vs SGST/CGST on my invoices raised for Indian customers is the location of the recipient of service. If the recipient of services is in the same state as you are, you have to charge SGST/CGST if the recipient is in a di
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manent establishment), services customers in Delhi and North India but shipments are from Mumbai, can I choose to not to raise invoices from my Delhi branch on my Delhi customers and instead centralise my billing at my head office in Mumbai?
Ans. No, you cannot centralise your billing in your head office or branch office, you must have a state wise registration with separate GSTIN numbers for each state. If you have a full-fledged branch office in Delhi that services Delhi customers then invoices must be raised by your Delhi office for your Delhi customers. Your Mumbai office, in turn, has to raise an invoice on your Delhi office for services supplied by the Mumbai office to the Delhi office. Alternatively, your Mumbai office is free to raise once a month, a consolidated statement for services supplied by the Mumbai office to the Delhi office throughout the month.
Your Mumbai office will get to consume the ITC on invoices raised by service providers in Mumbai for freight, THC, etc.
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or importer makes payment to the CFS, can this be treated as pure agent concept? Will the importer be allowed to claim ITC?
Ans. No, the importer will not be allowed to claim ITC in this situation. If the CFS raises an invoice on the customs broker, then the customs broker, in turn, must raise an invoice on the importer for the same service.
21) Is there a concept of pure agent/disbursement under GST regime.
Ans. Yes, there is pure agent concept in GST, in the previous example, customs broker must ask the CFS, shipping line, etc. to make the invoice in the name of the importer. Customs broker can pay on behalf of the importer and importer will be able to use the ITC. Since the invoice of the CFS, shipping line, etc., is in the name of the importer, the customs broker cannot claim ITC on this transaction.
It is advisable that you obtain an authorization letter from your customer (once every year) authorising you to customs clearance, transport, pay shipping lines, etc., on their beh
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