Indian government extends tax waiver on freight in relief for exporters

New Delhi — The Indian government has extended the waiver of the 5% Goods and Services Tax GST on export freight until September 2021, in a move that will come as a relief to exporters.

The waiver will be applicable to both air and ocean export freight, India's finance ministry said in a notification late Sept.30.

In January 2018, the Indian government announced the waiver of the 5% GST on export freight. While the relaxation was initially valid until Sept. 30, 2018, the government has announced yearly extensions since then.

The deadline for the waiver was to expire on Sept. 30, and there had been no word from the government until late evening, leaving exporters worried.

Major shipping liners CMA CGM, Hapag Lloyd, COSCO India had also released customer advisories about the impending increase.

In past years, the announcement came well in advance, so this year speculation built that the government was not planning to extend the waiver, a freight forwarder based in India said.

However, the tax relaxation is more crucial in the current scenario as exporters are already facing a double whammy of weak demand and high container rates.

Container rates in India have been moving higher in recent months due to an acute equipment shortage in Asia on account of supply disruptions as the pandemic continues.

The situation is further aggravated by shipping liners diverting capacity on the trans-Pacific route due to record high prices, leaving exporters in other parts of Asia scrambling for empty containers.