ITC eligibility on transportation of export goods

by | Nov 29, 2022 | Outlook

Vide this Outlook, we intend to discuss eligibility of ITC of IGST charged on overseas transportation of export goods by vessels and aircrafts from customs station of clearance in India (‘export freight’).

Export freight has been made exigible to GST effective October 1, 2022. Pertinently, place of supply for export freight is destination of goods (i.e., outside India) under proviso to Section 12(8) of the IGST Act. Therefore, Indian export freight service provider charges IGST with place of supply as ‘other territory’. This has made taxpayers doubtful regarding ITC eligibility thereof.

Notably, there is no provision under the CGST Act or the IGST Act barring ITC of IGST when place of supply is outside India or State of GST registration. Therefore, ITC on export freight is available.

NITYA Comments: Disputes have been raised in multiple Advance Rulings on ITC eligibility of CGST and SGST where place of supply is outside State of GST registration. However, no such dispute has yet been raised regarding ITC eligibility of IGST. Further, such IGST also appears as eligible ITC in GSTR-2B. Hence, exporters can avail such ITC.

 It is pertinent to note that GST Council initially intended to zero rate export freight and with this intent, place of supply was made outside India.