High Sea Sales’ is a common trade practice whereby the original importer sells the goods to a third person before the goods are entered for customs clearance. After the High sea sale of the goods, the Customs declarations i.e. Bill of Entry etc is filed by the person who buys the goods from the original importer during the said sale.

As provided in GST Laws, all inter-state transactions are subject to IGST. Further, High sea sales of imported goods are akin to inter-state transactions.

Tax Incidence Under GST Regime  

Whether the High Sea Sales of imported goods would be chargeable to IGST twice i.e.….

At the time of Customs clearance under Customs Tariff Act, 1975 & also separately

The Integrated Goods and Services Tax Act, 2017 ?

The GST Council has decided that IGST on high sea sales transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e. when the import declarations are filed before the Customs authorities for the customs clearance purposes for the first time. 

Further, value addition accruing in each such high sea sale shall form part of the value on which IGST is collected at the time of clearance. The importer (last buyer in the chain) would be required to furnish the entire chain of documents, such as original Invoice, high-seas-sales-contract, details of service charges/commission paid etc, to establish a link between the first contracted price of the goods and the last transaction.  

In case of a doubt regarding the truth or accuracy of the declared value, the department may reject the declared transaction value and determination the price of the imported goods as provided in the Customs Valuation rules. 

Source: CBEC Circular No. 33 of 2017 Dated 1st August 2017

The Author is a Budding Tax Law Professional & may be reached at shreetaxchambers@bsnl.in

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