GST ON EXPORT FREIGHT FOR FREIGHT FORWARDERS, Goods and Services Tax - GST

[Anwar Uddin]

Dear Sir/Madam,

Under GST regime Ocean Freight Export is taxable @ 5%

I need to know if Freight Forwarders buys Ocean Freight @ USD1000 from shipping line & pays GST@5% and sell it to Exporter @ usd1200, @ what GST rate Freight Forwarder should bill to exporter 5% or 18%?

Kindly confirm.

Best Regards

Anwar

Posts / Replies

[YAGAY andSUN]

This is a common issue under the GST regime involving freight forwarders acting as intermediaries between shipping lines and exporters.

Short Answer:

If a freight forwarder buys ocean freight from a shipping line and sells it to an exporter as a principal (not as an agent), the GST rate applicable is 5% on the freight value charged to the exporter.  However, if the freight forwarder is acting as an agent or providing composite logistics services, then 18% GST may be applicable on the entire service value under the classification of "logistics or freight forwarding services".

So the correct GST rate depends on the nature of service being provided and invoiced.

Let’s break it down:

Case 1: Pure Ocean Freight Transaction (Principal-to-Principal Basis)

• Freight Forwarder purchases ocean freight from shipping line @ USD 1000 + 5% GST.

• Resells ocean freight to exporter @ USD 1200.

• No other services provided (like documentation, warehousing, etc.)

GST Rate Applicable = 5% on USD 1200
As per S. No. 9 of Notification No. 8/2017-Integrated Tax (Rate) dated 28th June 2017 – Ocean freight for export is taxed @5% under SAC 9965.

Case 2: Composite Logistics or Freight Forwarding Service

• Freight forwarder provides multiple services (like booking, documentation, CHA, transportation to port, etc.)

• Charges a consolidated price for the logistics solution.

GST Rate Applicable = 18% under SAC 9967
It is treated as a composite supply or freight forwarding service, not just ocean freight resale.

Important Note:

• The GST Council and CBIC have clarified multiple times (including via advance rulings) that:

  • If freight forwarder acts as a principal, buying and reselling ocean freight, GST at 5% applies.

  • If freight forwarder is providing freight forwarding/logistics services, 18% applies.

Conclusion: In your case, if:

• The freight forwarder buys ocean freight from a shipping line at USD 1000 + 5% GST,

• Then sells it to the exporter at USD 1200, with no other service component,

The freight forwarder should charge 5% GST on USD 1200 to the exporter.

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[Anwar Uddin]

Respected Sir,

Shipping line don't bill Ocean freight individually other support services like terminal handling & documentation also bill along with freight, Normal billing format of shipping line & freight forwarders as below:

SHIPPING LINE BILLING:

OCEAN FREIGHT @ 5% SAC:996521

ORIGIN TERMINAL HANDLING:@ 18% SAC 996711

DOCUMENTATION OR ANY OTHER SERVICE:@18% SAC 996799

FREIGHT FORWARDERS BILLING:

OCEAN FREIGHT:@5% OR 18%?? SAC 996521 OR ANY OTHER??

ORIGIN TERMINAL HANDLING@18%

DOCUMENTATION @18% SAC SAME AS ABOVE

[YAGAY andSUN]

I will check and revert by tomorrow.

[YAGAY andSUN]

Thanks for the detailed breakdown — you're already covering the key aspects. Let's now zero in on your core question:

"When a freight forwarder purchases ocean freight from a shipping line @ USD 1000 + GST 5%, and sells it to the exporter @ USD 1200, what GST rate should apply — 5% or 18%?"

✅ Short Answer:

If the freight forwarder is acting as a principal (buying space and reselling), and invoices "Ocean Freight" separately, then 5% GST applies on the resale to the exporter under SAC 996521.

BUT — if it's a composite supply of logistics services, or the freight forwarder is bundling other services (e.g., documentation, terminal handling), then the entire supply may attract 18% GST under SAC 9967.

🧾 Billing Format & GST Rate Analysis:

📌 1. Shipping Line Billing:

Service	SAC Code	GST Rate
Ocean Freight (Export)	996521	5%
Terminal Handling Charges	996711	18%
Documentation	996799	18%

✔ This is standard and compliant with Notification No. 8/2017-IGST (Rate).

📌 2. Freight Forwarder Billing:

Now, you must assess:

Scenario A: Separate Line Items (Break-up Provided)

If you invoice the following separately:

Component	GST Rate	SAC Code
Ocean Freight	5%	996521
Origin THC	18%	996711
Documentation/Service Fee	18%	996799

➡ Allowed: You can charge 5% GST on freight, and 18% on other services.

📝 Condition: You are not bundling these services into one all-inclusive charge. Each is separately identifiable.

Scenario B: Bundled/Composite Supply

If you charge USD 1200 all-inclusive, covering freight + handling + documentation, without break-up:

➡ Treated as composite supply of logistics service.
➡ 18% GST applicable on entire amount under SAC 9967.

⚠️ CBIC Clarification & Advance Rulings

Several Advance Rulings (e.g., in Karnataka and Maharashtra) have held:

Forwarders acting as agents/commission basis → 18% applies.

Forwarders reselling freight without other bundled services → 5% applies.

Bundled charges (freight + services without break-up) → 18%.

✅ Conclusion:

Case	GST Rate	SAC Code
Forwarder resells ocean freight ONLY	5%	996521
Forwarder adds services, shows break-up	5% (freight) + 18% (others)	996521 + 9967xx
Forwarder charges bundled fee	18%	9967xx

✅ You can charge 5% on the USD 1200 only if:

You clearly segregate freight from other services.

You’re not bundling services as “freight forwarding” or “logistics.”

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