QUESTION

Goods exported on payment of IGST but the Taxable person not paying GST on export Insurance charges received from foreign buyers of the goods. As per exporter, SB custom portal is not allowing GST payment on exported expenses like export insurance charges etc. Assessee is not including these expenses in the Taxable value which is against the Valuation Rule, Can department ask GST on these expenses treating this as composite supply, though it is Revenue Neutral matter.

ANSWER

FACTS OF THE CASE:

Goods were exported on payment of duty, however GST was not charged on Insurance charges.

LAW APPLICABLE:

Clause (c) of Section 15(2) CGST dictates that
"'(2) The value of supply shall include
.
.
(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services"

INTERPRETATION:

As per section 15 CGST the incidental expenses charged by the supplier in respect of the supply must be added in the value of supply. This amount shall be taxable under the same HSN and at the same rate as that of goods.
However in your case since export was made on payment on tax and refund of the same was claimed therefore with a lower valuation of goods a lower amount of tax refund is claimed. It is fitting to say that there is no loss to the revenue because with a higher payment of tax, a higher amount of refund would have been given to the exporter.

CONCLUSION:

It is advised that as per section 15 CGST, insurance amounts should be added in the value of goods and be taxed at the same rate and under the same HSN as that of goods. However if the same has not been done and a demand notice is received in future then such a notice shall certainly be dropped on the grounds that there is no loss to the revenue because this is a case of refund on export made on payment of duty.  (Reply dt. 01/09/2021)