‘No GST on expenses incurred as pure agent’

We had received a letter of credit (LC) for export of certain goods. The LC, besides other documents, calls for a “clean on board” bill of lading (BL). We have shipped the goods and obtained a BL. The word “clean” appears on the BL, but has been struck off. Can the buyer or banks refuse to pay on the grounds that it is not a clean BL?

No. Article 27 of the Uniform Customs and Practices for Documentary Credits, 2007, ICC Publication no. 600 (UCP 600) says that a clean transport document is one bearing no clause or notation expressly declaring a defective condition of goods or their packaging. The word “clean” need not appear on a transport document even if a LC has a requirement for that transport document to be “clean on board”.

ICC Publication no. 681 on International Standard Banking Practices says at Clause 107 that if the word “clean” appears on a BL and has been deleted, the BL will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.

Our customer has placed an order for goods, where the price is based on ex-factory delivery. The customer, however, has requested us to dispatch the goods on his behalf and agreed to reimburse the transportation costs. Do we have to charge GST on the invoice for such reimbursement?

No. In this case, you are acting as a “pure agent” as defined in the Explanation to Rule 33 of the CGST Rules, 2017. You need not include the costs and expenses you incur as a “pure agent” in the value of taxable supplies, provided you fulfil the conditions stated in Rule 33. One of the conditions is that the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service. Please go through Rule 33 carefully.

Circular no. 115/34/2019GST of the CBIC, dated October 11, 2019, may also help you understand the concept better. A better option is for you to facilitate the transportation of goods but ask the transporter to bill your customer directly and let your customer generate the e-way bill, make the payment directly to the transporter, discharge the GST liability on reverse charge basis and take input tax credit of the tax amount.

We have received deemed export supplies. CBIC Circular NO.125/44/2019-GST dated November 18, 2019 says that the recipient of deemed export supplies cannot avail ITC on such supplies. But, when we proceed to file for GST refund on the portal, the system requires debit of the amount so claimed from our electronic credit ledger. What should we do?

The issue has been resolved through CBIC Circular no. 20/23/03/2020, dated March 12, 2021, by amending the condition regarding non-availment of input tax credit in the earlier Circular, dated November 18, 2019.