GST ON EXPORT FREIGHT AND INSURANCE

This query is : Resolved

Heena (Querist)
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05 February 2022 On our exports on CIF basis, we are required to declare freight and insurance on the shipping bill so that the correct FOB amount is available to work out the drawback amount. At the time of export, we do not know the actual freight or insurance amount. So, we declare it on an approximate basis.
We are making export invoice with IGST @ 18%
Now, my question is
1. If we include Freight and insurance in Export Invoice, whether it would attract GST? And such GST is payable?

IF YES;
In GSTR – 1, in table No.6A, taxable value goes basic + Freight + Insurance and same for IGST amount.
For Example
Export Goods Value – RS.100000
Freight Expense – RS.15000
Insurance Expense – RS.10000
Total – RS.115000
IGST @ 18% - RS.20700 (ON RS.115000)
Now, the refunds of IGST are adjusted on FOB basis that means IGST paid on Freight, insurance are not refundable so on ICEGATE taxable Value will be RS.100000 and IGST amount will be RS.18000 (18% of 100000).
Hence, it will create mismatch among invoices shown in table 6A and invoices on ICEGATE.
IF NO:
If we don’t charge GST on Freight and Insurance in Export Invoice. Will it be okay? And can we show Freight Insurance Amount in GSTR – 1 in 0% tax rate field?

Please guide us above case for Invoicing, Accounting and GST Return.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 February 2022 1 No.
Yes, it's okay.

Heena

Heena (Querist)
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05 February 2022 But sir if we goes according option 1 that is YES, then invoice mismatch error will occur between ICEGATE and table No.6A of GSTR 1..because ICEGATE shows FOB value and GSTR 1 is on CIF value..then our IGST refund will not get release due to such mismatch

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CA Altamush Zafar

CA Altamush Zafar (Expert)
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05 February 2022 If you are exporting on CIF basis then taxable value will include freight and insurance.
As far as refunds are concerned on exports on payment of IGST they are allowed only to the extent of tax on FOB value.

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Heena

Heena (Querist)
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07 February 2022 Yes Exactly. So, if we are showing invoice on CIF basis in GSTR-1 than there will be a mismatch between ICEGATE and GSTR-1 invoices and our refund will not release. So, is it okay if we show CIF invoice at FOB value in GSTR-1 ?

Heena

Heena (Querist)
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CA Altamush Zafar

CA Altamush Zafar (Expert)
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07 February 2022 There is no issue in mismatch between icegate and gst portal since both custom law and gst law are different and have different valuation. Export in custom is valued on FOB however in GST it is supply therefore it includes insurance and freight.
Therefore for CIF exports in gst return you will take full CIF value as taxable value

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Heena

Heena (Querist)
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07 February 2022 okay, so our refund will not get stuck right ?

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CA Altamush Zafar

CA Altamush Zafar (Expert)
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07 February 2022 Your refund won't get stuck but you will not get full refund. You would have paid IGST on CIF but will get refund only till the extent of fob value

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Heena

Heena (Querist)
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07 February 2022 Okay. Thank You so much Sir for the quick response. However, one last question is in my mind.. If we show CIF export on FOB value in GSTR -1, will it be legal ?

CA Altamush Zafar

CA Altamush Zafar (Expert)
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07 February 2022 No
It will be in violation of sec 15 of cgst act

Heena

Heena (Querist)
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07 February 2022 Okay. Got it. Thanks again

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