Yes, GST is payable on export freight in India, as the previous exemption for air and ocean freight expired on September 30, 2022. Export freight now attracts IGST, generally at 5% without Input Tax Credit (ITC) or 18% with ITC, based on the service provider's choice.
If a freight forwarder buys ocean freight from a shipping line and sells it to an exporter as a principal (not as an agent), the GST rate applicable is 5% on the freight value charged to the exporter.
Shipping both goods and services internationally are zero-rated under GST. This means GST is not applicable on exports, but exporters can claim ITCs used to purchase or manufacture the products from the exported supplies.
GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia (the indirect tax zone) and on most imports of goods. Exports of goods and services from Australia are generally GST-free.
The international transport of goods (including the arranging of such services) is GST-free from a place outside Australia to the place of consignment in Australia for a supplier of that transport into Australia.
Exporting Goods: Goods physically exported from New Zealand are zero-rated for GST purposes. You must retain documentation proving the goods left the country, such as shipping invoices and export declarations. This is supported by section 11 of the Goods and Services Tax Act 1985.
Exports are important for a country's economy and GDP(Gross Domestic Product). This is why the government of India treats exports as zero-rated supplies under the goods and services tax (GST) export rules, meaning the GST on these supplies is zero.
Zero-rated supplies
Exports Under GST Law
Both goods and services exported are considered zero-rated supplies. This means: You don't need to charge GST to foreign clients. You can claim input tax credit (ITC) refunds on the GST you paid for business purchases.
The GST Council, a constitutional body, oversees the GST regime. They make key decisions on tax rates, exemptions, and policies. Furthermore, the CGST Act and IGST Act provide the legal foundation for GST implementation.
Exporters have two ways to comply with GST:
Merchant exporters can obtain goods from a manufacturer at a concessional GST rate of 0.1% for export. Deemed Exporter: This refers to a person who supplies goods that do not leave India but are notified as deemed exports under section 147 of the CGST Act.
In most cases, GST is applied to the taxable value of imports, which includes the cost of the goods, insurance and freight (CIF).
No, export of services is considered a zero-rated supply under GST. This means that no GST is charged on the export of services. However, exporters can claim a refund of the unutilised input tax credit (ITC) on taxes paid for inputs and input services used in the export of services.
These include bank transfers between accounts, stamp duty, depreciation and salary/wages. These are purchases/sales that have a 0% GST rate. Examples include, purchasing items from overseas (exports); purchasing items from within Australia that are not subject to GST, eg. fresh food, some education.
Common Examples of GST Exempt Transactions:
Financial services – Most banking services, interest payments, and insurance premiums. Residential rent – Rental income from residential properties. Donated goods and services – Items or services that are given away without payment.
Exempted Goods under GST
Components such as human blood. Manufacturing parts of hearing aids, such as handloom, chalks, slates, etc. Non-GST goods include egg, fish, fresh milk, etc.
Using the wrong tax codes or accounting method
Many GST mistakes are the result of using incorrect tax codes or the wrong accounting method: Tax codes: If a GST-free sale is coded as taxable in your accounting system, you'll pay GST unnecessarily. If a taxable sale is coded GST-free, you'll underpay.
Under the GST legislation, exports of goods and certain international services are GST-free. This means businesses do not charge GST on these supplies, but they can still claim GST credits on their inputs.
GST on exports
As such, you don't need to charge GST on exported goods as they're considered to be 'zero rated'. You do need to prove, however, that the goods are indeed being exported overseas and purchased by a foreign buyer.
Under GST, imports are treated as inter-state supplies and attract IGST, while exports are considered 'zero-rated supplies,' meaning exporters can claim a refund of the GST paid on inputs. Special provisions also apply to the import and export of services.
From October 1, 2022, shipping lines or freight service providers must charge GST on export freight services. Exporters can choose to pay 5% GST without claiming input tax credit or pay 18% GST and claim input tax credit.
Domestic freight transportation services are generally subject to the GST at a rate of 5%, or the HST at the applicable harmonized rate if made in a participating province, but may qualify for zero-rating in certain circumstances if they are part of an international freight movement.