Export of Goods with payment of Tax, Goods and Services Tax - GST

[RAMNIRANJAN KANDOI]

Facts of the Case:

Party A exports material with payment of Tax.

The GST Tax Invoice is prepared where Tax is paid on material only.

Freight Value is shown in the Invoice but tax on freight is not calculated and paid..

The Export is made under CIF value.

In Commercial Invoice, a break up is given as under

Material Valu

Freight Valu

Total Amt

Buyer has made full payment i.e. of material and freight.

In shipping bill break up is shown as FOB Value and Freight Value Since GST was not paid on freight hence refund received to the extent of Tax paid i.e. on the material exported.

Query

1) Is the above process correct

2) If GST is to be paid on freight then will one get auto refund of the tax paid on freight

3) Now if Party A decides to pay tax with interest for prior period for the freight shown on Invoice then will the party get refund of tax? If yes what would be the process

4) Is there any way of paying Tax on freight and take ITC on the same?

Posts / Replies

[raghunandhaanan rvi]

FOB is the transaction value for the export of goods. On the transactional value or FOB, a tax is levied. The addition of freight and insurance to the transaction value for the purpose of levying tax is not required under the 2007 Customs valuation rules for export goods, as it is in the case of imports.

[Joe Susai]

Please clarify me if an export under CIF terms what is the IGST Value should be declared in Shipping Bills to get Refund of IGST i.e. if FOB or CIF value should be declared as IGST Values in Shipping Bills and based on the same if refund of IGST is eligible on CIF Values.

Please note in shipping bills the IGST Values are entered manually hence there are differences between FOB values and IGST Values and CFR Values are declared as IGST Values in Shipping Bills.

[Ganeshan Kalyani]

FOB value is considered for the purpose of refund.

[Joe Susai]

Thanks for your replies and noted that IGST Value declared in Shipping Bills must be FOB Value.

But it has been found in “Guide on IGST Refunds in ICES” issued by Directorate General of Systems, CBEC:

Quote:

It was understood that there would not be any difference between Commercial Invoice and GST Invoice after GST since as per the GST Laws; the IGST is to be paid on the actual transaction value of the supply between the exporter and the consignee, which should be the same as the one declared on the commercial invoice.

Unquote:

In this it is not found about Incoterms or International Commercial Terms i.e. FOB, CFR, CIF and DDP etc.

And the entry can be done manually for IGST Values in Shipping Bills hence I am not able to understand how the IGST Values declared in SBs are calculated.

[raghunandhaanan rvi]

Dear Sir,

Please refer to CBEC Circular No. 18/2008 – Customs dated 10.11.2008 for a detailed study and understanding. According to the said circular, Section 14 of the Customs Act of 1962 states that for the purposes of calculating the export duty, the transaction value, or the price actually paid or payable for the goods for delivery at the time and place of exportation, shall be the FOB price of such goods at the time and place of exportation. If the transaction is for Rs. 100 FOB and the export duty is 15%, for example, the export duty will be Rs. 15, or 15% of the FOB price. If the transaction was concluded on a CIF basis, the export duty would be calculated at 15% of the FOB price after the FOB price was subtracted from the CIF value.

Therefore, if your incoterm is CFR, the freight charges should be subtracted from CFR and show FOB and Freight separately in the invoice and shipping bill.

[Joe Susai]

I just want to know how the IGST Value declared against Exports in Shipping Bills to get Refund of IGST i.e. as per invoice values in FOB, CFR, CIF, DDP etc and refunds of IGST will be for the same or should declare only in FOB even though exported in CFR, CIF, DDP etc.

[Shilpi Jain]

Your commercial invoice will have Taxable value as the CIF value

IGST computed on the above in the invoice.

Shipping bill will have FOB value declared

In the invoice value column in SB - the value as per invoice will be mentioned

The IGST in the SB will be mentioned as per the invoice.

The IGST and invoice value in the SB should match with the tax invoice issued in this regard and disclosed in the GSTR-1

[Joe Susai]

But still my doubt is not clarified since there is provision in Shipping Bills to enter separately details of cost like Invoice value, Freight, Insurance and FOB values in Foreign Currencies and it will be automatically converted into INR as per the exchange rates notified by CBIC. Then why there is a provision separately for IGST Value and the same have provision to enter manually in INR in addition to Invoice Values. Why should not take the Invoice values should not be taken as IGST Values to get refund of IGST Tax against Export instead of having additional provision to enter IGST Value manually in SBs. Please clarify me.