‘No extension likely to hike cash flow pressure for exporters’

According to an official statement released by the Air Cargo Agents Association of India (ACAAI), internationally, there is no levy of GST on export air freight and export sea freight. International transportation including local transportation and handling services ancillary to international transportation is zero-rated in Singapore. Similarly, in Australia, international transport of goods including arranging of such services is GST free from the place of export in Australia to a destination outside Australia. When GST was introduced from July 2017, both air freight export and sea freight export segment were taxed. However, after various rounds of representations, the GST Council saw the wisdom in the request for exemption and issued exemptions in respect of services by way of transportation of goods by an aircraft from customs station of clearance in India to a place outside India as well as transportation of goods by a vessel from customs station of clearance in India to a place outside India. This exemption has been extended from time to time and unfortunately, it has expired on September 30, 2022 and has not been further extended causing huge impact on freight forwarders as well as exporters who are already going through serious challenges on account of various developments across the world; increased freight cost; and impending recession. It is also likely to have disastrous consequences on account of cash flow pressure for both freight forwarders and exporters. India is going through a tough period with reports of possible recission in other countries which will affect our exports; energy crisis in other countries which is likely to stop production and affect demand of India’s goods; high international freight rates due to oil pricing. When internationally, most countries zero-rate air freight and sea freight, India chose the exemption route. While zero-rating would have been ideal, to some extent, the exemption served the purpose since GST on air freight or sea freight in the export segment is directly a tax on exports. India as a country and the ‘Make in India’ flagship programme would be affected since none of the neighboring countries levy GST on international freight. Levy of GST on export freight would make our products costlier and mere refund mechanisms in the hands of the exporters would not suffice given the fact that levy of tax itself operates as a dis-incentive on an export transaction. The non-availability of exemption would result in freight forwarding business moving abroad which can have a huge impact on India’s growth potential and employment. Therefore, our Association and many other associations including export bodies are making representations to the GST Council and the Government to restore the exemption.