High Sea Sales - GST Applicability

High sea sales is a sale carried out by the actual consignee (i.e. the consignee shown in the Bill of Lading) to another buyer while the goods are on high seas or after their dispatch from the port of loading and before their arrival at the port of discharge. For example, if a buyer in India purchases iron scrap from USA and while the shipment is in transit, the goods are sold to another person, the transaction would be termed as high sea sales. Hence, the high sea sales agreement / contract should be signed after dispatch of goods from the origin and prior to their arrival at destination. On concluding the high sea sales agreement, the bill of lading should be endorsed in favour of the buyer. The title of the goods transfers to the buyer and

bill of entry is also filed in the name of buyer. In this article, we look at the applicability of GST on high sea sales.

High Sea Sales under GST

After the high sea sale of the goods, the Customs declarations i.e. Bill of Entry etc is filed by the person who buys the goods from the original importer during the said sale. In the past, CBEC has issued various instructions regarding high sea sales appropriating the contract price paid by the last high sea sales buyer into the Customs valuation.

Under GST, the question raised by the industry was the applicability of GST on high sea sales - specially if GST would be levied on the transaction between the buyer and seller while the goods were in transit and if GST.

When levy of GST will happen in high sea sales?

Who will be responsible for the payment of GST in a high sea sales?

As per provision of section 7 (2) of the IGST Act, supply of goods in the course of import into the territory of India, till they cross the Customs frontiers of India will be deemed to be a supply in the course of Interstate trade or commerce. Hence, GST would be applicable on the transaction. However, the time of levy of GST would be different for high sea sales as under.

Time of Levy of GST

For high sea sales, the GST Council has decided that IGST on high sea sale (s) transactions of imported goods, whether one or multiple, will be levied and collected only at the time of importation i.e. when the import declarations are filed before the Customs authorities for the customs clearance purposes for the first time. Further, any value addition accruing in each such high sea sale will form part of the value on which IGST is collected at the time of clearance. Thus the final buyer would be responsible for payment of GST on the full value of goods plus any value addition, at time of import. (Know more about

GST on import)

Payment of GST for High Sea Sales

The GST Councils decision with respect to GST on high sea sales is similar to that of the rules provided under the Customs Tariff Act, 1975. Under the Customs Tariff Act, in respect of imported goods, all duties, taxes, cessess etc will be collected at the time of importation i.e. when the import declarations are filed before the customs authorities for the customs clearance purposes. The last buyer in the chain and importer would be required to furnish the entire chain of documents, such as original invoice, high-seas-sales-contract, details of service charges/commission paid etc, to establish a link between the first contracted price of the goods and the last transaction. Hence, under GST as well, the final buyer in a high sea sales transaction is responsible for

payment of GST and providing the necessary documents as required under Customs for clearance of the goods.

GST Council Notification

The above clarification was provided by the GST Council vide Circular No. 33 /2017-Cus dated 1st August, 2017. GST Council Circular No.33 / 2017 is reproduced below for reference:

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Frequently Asked Questions

Common questions about High Sea Sales Under GST.

A high sea sale is a transaction where the actual consignee (the consignee shown in the Bill of Lading) sells the goods to another buyer while the goods are in transit, after being dispatched from the port of loading and before arriving at the port of discharge.

According to Section 7(2) of the IGST Act, the supply of goods in the course of import into India is deemed to be an interstate supply. Therefore, GST is applicable on high sea sale transactions. However, the time of levy of GST is different for high sea sales.

The GST Council has decided that IGST on high sea sale transactions of imported goods will be levied and collected only at the time of importation, i.e., when the import declarations are filed before the Customs authorities for customs clearance purposes for the first time.

The final buyer in the chain of high sea sale transactions is responsible for paying GST on the full value of the goods, including any value addition, at the time of import.

The final buyer must furnish the entire chain of documents, such as the original invoice, high-seas-sales-contract, details of service charges/commission paid, etc., to establish a link between the first contracted price of the goods and the last transaction.

In a high sea sale transaction, any value addition accruing in each high sea sale will form part of the value on which IGST is collected at the time of customs clearance.

The GST Council's decision on high sea sales is similar to the rules provided under the Customs Tariff Act, 1975, where all duties, taxes, cesses, etc., are collected at the time of importation when import declarations are filed for customs clearance.

Yes, the GST Council issued Circular No. 33/2017-Cus dated 1st August, 2017, clarifying the applicability of GST on high sea sale transactions.

The GST treatment of high sea sales is broadly similar to the earlier regime, where the transaction value for customs valuation was determined based on the contract price paid by the last high sea sales buyer.

In a high sea sale transaction, the Bill of Lading should be endorsed in favor of the buyer, as it signifies the transfer of title of the goods to the buyer. The Bill of Entry is also filed in the name of the buyer.