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



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