Understand the impact of omitting Section 12(8) and Section 13(9) of the IGST Act on GST for Export Freight. Learn about determining the “Place of Supply” for services and its implications on transportation of goods outside India.
Export Freight for transportation of goods to a Place outside India – Impact of Omitting Section 12(8) and Section 13(9) of the IGST Act (Budget 2023-24)
Determining “Place of Supply” of Services
Determining the place of supply of service is difficult in comparison to the place of supply of goods, as services are intangible.
Rules for determining place of supply of service are very important to bring uniformity.
The principle of “destination-based consumption tax” is a guiding factor for determining the place of supply of services under various circumstances.
Hence, the place of supply would be in general fixed at the place where the services are destined (not easy to do so)
Section 12 and 13 of the Integrated Goods and Service Tax Act provides the rules for determining “Place of Supply” of services.
Section 12 states the Rules for determining “Place of Supply” of services where:
Both Locations of Supplier of Service & Recipient of Service. are in INDIA
Section 13 provide Rules for determining “Place of Supply” of services where:
Location of either of Supplier of Service OR Recipient of Service. is outside INDIA
Here we will examine the effect of Omitting Section 12(8) and Section 13(9) of the Integrated Goods and Services Tax with respect to “Freight for Transportation of Goods to a place outside India”
Impact of omitting Section 12(8) of the Integrated Goods and Service Tax on Freight for Transportation of Goods to a place outside India
Before omitting Section 12(8):
1. The service provider and the service recipient both are in India
2. Transpiration of goods is to place outside India
3. The transaction covered under specific rules under section 12(8) of IGST act
4. The place of supply considered the destination of the goods “Other Territory” & “IGST” was charged on the Freight for transportation of goods to a place outside India even if Service Recipient and Service Providers are registered in the same state
After omitting Section 12(8) of Integrated Goods and Service Tax. The “Place of Supply” will be determined under “General Rules Section 12(2) of the Integrated Goods and Service Tax Act,
1. If recipient is a registered person, then the POS would be the location of the recipient of service.
2. If recipient is not a registered person & address of recipient exists on record then POS would be the location of the recipient.
3. However, in the case the address of the recipient does not exists on record, then POS would be the Location of supplier.
CGST/SGST/IGST will be Charged, as per below table, on the Freight for transportation of Goods to a place outside India
| Address of Service Recipient | Address of Service Provider | Place of Supply | CGST | SGST | IGST |
| Maharashtra (Registered) | Maharashtra | Maharashtra | Applicable | Applicable | Not Applicable |
| Maharashtra (Registered) | Delhi | Maharashtra | Not Applicable | Not Applicable | Applicable |
| Maharashtra (Un-Registered, address available ), | Maharashtra | Maharashtra | Applicable | Applicable | Not Applicable |
| Maharashtra (Un-Registered, address available ), | Delhi | Maharashtra | Not Applicable | Not Applicable | Applicable |
| Maharashtra (Un-Registered, address not available ), | Maharashtra | Maharashtra | Applicable | Applicable | Not Applicable |
| Maharashtra (Un-Registered, address not available ), | Delhi | Delhi | Not Applicable | Not Applicable | Applicable |
The amendment will clear the clouds over utilisation of the Input tax credit. The concept of the “Other Territory” is insignificance now, when the supplier and recipient both are within India.
Impact of omitting Section 13(9) of the Integrated Goods and Service Tax on Freight for Transportation of Goods to a place outside India
Before omitting Section 13(9):
1. Where either of the Recipient or Supplier of Services is Outside INDIA
2. Services of transportation of goods, other than by way of mail of courier
3. The transaction covered under specific rules under section 13(9) of IGST act
4. The place of supply considered the destination of the goods “Other Territory” and GST not charged on the Freight for transportation of goods to a place outside India
After omitting Section 13(9) of Integrated Goods and Service Tax. The “Place of Supply” will be determined under “General Rules Section 13(2) of the Integrated Goods and Service Tax Act,
1. The place of supply of services shall be the location of the recipient of service
2. If location of the recipient of service is not available in the ordinary course of business, the place of supply shall be the location of the supplier of service
3. If recipient is not a registered person & address of recipient exists on record then POS would be the location of the recipient.
CGST/SGST/IGST will be Charged, as per below table, on the Freight for transportation of Goods to a place outside India
| Address of Service Recipient | Address of Service Provider | Place of Supply | CGST | SGST | IGST |
| United States of America (Address Available) | Maharashtra | United States of America | Not Applicable | Not Applicable | Not Applicable |
| Maharashtra | United States of America (Address Available) | Maharashtra | Not Applicable | Not Applicable | Applicable |
| United States of America (Address Available) | United Kingdom | Not in Indian territory | Not applicable | Not applicable | Not applicable |
Thus, the Freight paid to Overseas Agents for the Export shipments will not be taxable in India, The Service Recipient will need to pay IGST under reverse Charge mechanism
This will bring Indian Shipping Lines/NVOCC/Forwarding Companies at part with Overseas Shipping Lines/NVOCC/Forwarders.
The Exporters/Freight agents who were not paying GST on Export freight by utilizing their overseas network/payment to overseas shipping line/NVOCC/freight forwarders, will now have to pay applicable GST under reverse charge, if paid by them to overseas shipping lines/NVOCC/Forwarders
Author Bio
Deepak ji, Very nice and informative article.
Even though the Finance Act 2023 is enacted and omission of section 12(8) and 13(9) of of IGST Act, 2017 is proposed. However notification for Section 161 and 162 of Finance Act 2023 is not yet published. The motive behind deletion of the said provisions/ sections is still not fulfilled and it is trapped in dilemma.
It shows lack of efficiency from the authorities on this issue. Industry does not have clarity on the same and continuing old practice of issuing the invoices.
I am wonder if CBIC doesn’t not want give clarity on the same then why GST council gives such recommendations and parliament pass such amendments/bills.