GST on transportation services - navigating through turbulent waters
GST on services by way of transportation of goods by aircraft / vessel is certainly on a roller-coaster ride these days. The story began in September 2022, when the GST exemption pertaining to goods transportation services witnessed a sunset from 1 October 2022 onwards.
This resulted in taxing the transportation of export cargo by the Indian transporters / freight forwarders, liable to Integrated GST (IGST). This created a lot of buzz amongst the exporters as well as the Indian transporters /freight forwarders. Consequently, owing to the hardships faced, various associations and trade bodies filed representations before the Government against such withdrawal of GST exemption.
The following challenges were being faced by the Indian transporters / freight forwarders: a) As per the GST law, the place of supply for export cargo was the destination of such goods, i.e., place outside of India. Due to this, question arose as to whether the exporters in India could claim input tax credit (ITC) of the GST so collected by the transporters / freight forwarders since it was believed that such credit could only be taken at the place of supply. The exporters, nevertheless, took a chance and rightly so, as principally it did not make sense to deny the benefit of ITC which culminated into refund to exporters when exports are zero-rated.