AAR: Delivered Duty part of Export transaction value eligible for IGST Refund

The applicant, a garment manufacturer operating as M/s Arjun Knit Wear, is engaged in export of goods under Delivered Duty Paid (DDP) terms, where the responsibility of delivery including freight, insurance, import duties, and other overseas expenses rests entirely with the exporter. These costs are included in the invoice raised on foreign buyers, and exports are undertaken on payment of IGST.

Seeking clarity, the applicant approached the Authority for Advance Ruling (AAR) on whether such reimbursed expenses incurred abroad should form part of the transaction value for levy of IGST, and if IGST paid on such components would be eligible for refund under GST law.

Main Issue: The issue is whether expenses like ocean freight, insurance, foreign import duties, and delivery charges under DDP terms form part of the transaction value for IGST on exports, and whether refund of IGST paid on these amounts is admissible.

Tribunal Held: The Authority held that under DDP terms, the supplier bears all costs and risks until delivery of goods at the buyer’s location. Since these expenses are incurred by the supplier and form part of the consideration charged to the buyer, they squarely fall within the scope of “transaction value” under Section 15 of the CGST Act.

Accordingly, all such expenses including freight, insurance, import duties, and other charges incurred prior to delivery must be included in the value of taxable supply for the purpose of payment of IGST on exports. On the second issue, the AAR declined to give any ruling, observing that questions relating to refund fall outside the scope of advance ruling under Section 97(2) of the CGST Act.

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