High Sea Sales - R R Padmanabhan, Director - Exim Academy

High Sea Sales 


High Sea Sales is an interesting concept and is old as International business.  As the very name reveals it is a sale that happens in High seas.  But then, what are High Seas?  The Oxford dictionary calls it as ‘the open ocean especially that not within any country’s jurisdiction ‘.  The sale that takes places when the goods are on high seas is High Sea Sales.  

How does it work? 

Imagine an importer dealing in MDF particle board having a no of buyers in India.  He uses his skill in sourcing the same from Malaysia.  He regularly places order for these boards.  Because of the bulk nature of his order, the supplier in Malaysia provides not only competitive rates but also credit terms.  So, the Importer here in India has double advantage of less price and easy credit terms.  The importer knows the pulse of the market in India.  He places order with the Malaysian supplier for ten 20’ containers. 

The voyage from Malaysia to Chennai, India is about 3-4 days.  In the meantime, he has booked orders from his buyers in India for 8 containers.  Under normal circumstances, he has to clear the ten containers going through the customs formalities and pay duty including GST, bring the goods to his godown and sell the goods to the 10 of clients.  He would raise a local invoice and collecting GST in the process.  So, there would be GST payment twice for the same transaction. 

High seas sale concept provides perfect escape from this double payment.  Under this concept, the Importer enters in to agreement with the buyers in India for selling these goods even as they are on High seas.  Since, the sale happens in international waters, the GST is not payable.  But he may charge a small premium or profit for this transaction.  So, if he buys at X he may add 3% to the price and sell. 

Under the normal course, the importer has to file Bill of entry to clear the goods, But under this method, the buyers in India become importer in due course.  By filing this High sale agreement with the liners and customs, the manifest is amended so as to show the high sea sale transaction and buyer as the importer.  The Importer in due course files the Bill of Entry, observe customs formalities and pay duty including GST to clear the goods. 

Advantage to Buyers in India 

The buyer need not worry about investing upfront on import.  He can as well pay even as the goods left the shores and in Indian Rupee.  He can get the advantage of buying up in required quantities.  Or he may opt to sell the goods to another buyer.  Any number of buyers and sellers could be there for a single import.  That is why, it is called as ‘string sales’ 

Transaction Value for Customs

What is the value to be adopted for customs purpose?  In terms Section 14 of Customs Act, value at the time and place of importation in to India is the transaction value for customs purpose.  Since the transaction takes in High seas before entering India, the last transaction value is the value for customs duty determination. 

The Board Circular 32/2004 prescribes method to determine the transaction value incase of multiple number of sales happening for a single import.  The value paid by the last buyer who would be filing Bill of Entry to clear the goods would be the value for customs. 

High Sea Sales and GST 

 Since the transaction takes place much before the goods enter the Indian waters, as far as GST is concerned, the transaction is in the nature of inter state supply within the meaning of Sec 7(2) of IGST Act, 2017 as below: 

Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce. 

The liability to tax falls within the ambit of Sec 5 of IGST Act 2017.


R R Padmanabhan
Director - Exim Academy



Comments

Post a Comment

Popular posts from this blog

Salem - My District My Pride - R R Padmanabhan, Director - Exim Academy

Image
 Salem - My District My Pride I dare to say that entrepreneurial ecosystem begins from this district and goes through Erode, Tiruppur and Coimbatore.   There is so much of activity that goes on here. Salem is known as Steel City, but I would like to call it as Mango city.   The mango grown here is called as Malgova (I don’t know whether I spelt it right), the fruit is juicy and pulpy.   I checked up the Geographical Registry (GI), the fruit is yet to be registered.   It is time it is done to enhance its prestige in the world market.   Another distinct feature is Sago, native to Salem.   Recent times, Sago Serve, a State Government initiative in getting the farmers organized is doing well.    But much more needs to be in terms of marketing and branding.   The district is known for Granites, Fabrics, Readymade Garments, Egg and Coir and coir products.   In the state government’s One District One Product scheme, silver jewelry is taken up.  But Salem is much more than that.  It is of
Read more

Cuddalore - My District, My Pride - R R Padmanabhan, Director - Exim Academy

Image
 Cuddalore - My District, My Pride The export potentiality profile of this district is quite amazing.   The district looks quite and simple despite the presence of major industries like Neyveli Lignite Corporation (NLC), SanMar Chemicals and ONGC and number of sugar mills.   Beneath its calm surface, however, lie the vibrancy both in terms of religion, natural beauty, artistic dexterity and economy.   Perhaps, it is dwarfed by the presence of Pondicherry as its northern neighbor.   But instead of being overwhelmed by it like Villupuram, Cuddalore should strive to use international talent to its advantage.   Below is the list of export potential products and its location in the district Cashew Panruti Imitation Jewelry Chidambaram Organic chemicals Cuddalore Marine products Entire coastal area Ceramics Vadalur Coir Salaikarai Tourism Nata
Read more

Legalisation of Documents - R R Padmanabhan, Director - Exim Academy

Image
Legalisation of Documents Legalisation of documents mean document issued with correct stamp in order to be recognised in another country.   In India, whenever, goods are shipped to Gulf Cooperation Council (GCC)member states, the importers require trade documents to be legalised before sending to them.   The member countries of GCC are Kuwait, UAE, Saudi Arabia, Oman, Qatar and Bahrain.   While Legalisation can be sought by any country, GCC countries are more specific and demand the same.   These are the countries that are not part of Hague Convention, 1907.     According to Wikipedia, “ The Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, the Apostille Convention, or the Apostille Treaty, is an international treaty drafted by the Hague Conference on Private International Law”   Since these countries are not in the Hague Convention, the documents from India are to be attested or legalised by their respective consulates/embassies in India. Th
Read more