In this article, we will discuss how the GST tax regime affects high sea sales and what are the GST rates for such supplies.
What are High Sea Sales?
High sea sales are the supplies that are performed when the affected goods are still on the high seas and have not reached the port yet. These transactions generally take place even before the bill of entry is filed. The importer in such transactions sales the goods to a third-party even before the consignment goes for customs clearance. These are treated as inter-state supplies under the GST regime.
In case of high sea sales, the Customs Declarations, or more commonly known as Bill of Entry, is filed by the final buyer who ends up buying the goods from the importer.
Normally, in the case of imports, the taxes, including duties and cess, are collected at the time of filing of declarations during customs clearance by the authorities. However, in the case of high sea sales under GST, the supply is not subject to IGST as it is performed before Bill of Entry is filed.
* IGST on imports is charged at the time of filing of Bill of Entry.
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GST on High Sea Sales
According to Circular No- 33/2017- Customs dated 1st August 2017, IGST on imported goods via High Sea Sales transactions will be levied only at the time of filing the import declarations during customs clearance by the authorities for the first time. The GST amount, along with all other applicable taxes, will be collected at the same time.
The applicability of GST on high sea sales will also depend on the kind of transaction. For this purpose, high sea sale transactions can be of the following 2 kinds:
- Transaction commenced and concluded outside the territory of India
- Transaction commenced outside the Indian territory but concluded inside India.
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Transaction commenced and concluded outside the territory of India
Goods are sent from a country outside the Indian territory to an importer in India, but it never reaches to India, as the importer resells it to another person in a third country while it is still on the high seas. In such cases, since the goods were never brought into the territory of India, Section 7(2) of IGST Act does not apply to this supply.
Transaction commenced outside the Indian territory but concluded inside India
Goods are sent from a supplier located in another country to an importer in India. The goods then arrive at a port in India, but the importer sells it to another company located in India during the clearance. In such case, the high sea sale supply falls under the course of inter-state supply and IGST will be levied as per the rules under Section 7(2) of IGST Act.
Here‘s the official GST Council Notification (vide Circular No. 33 /2017-Cus dated 1st August, 2017) regarding high sea sales under GST.