Case Details: Arjun Knit Wear, In re [2026] 185 taxmann.com 326 (AAR - TAMILNADU)
Judiciary and Counsel Details
- B. Suseel Kumar & C. Thiyagarajan, Member
Facts of the Case
The applicant, a GST-registered manufacturer-exporter, sought an advance ruling in respect of exports made under Delivered Duty Paid (DDP) terms, wherein it undertook responsibility for delivery of goods, including all associated costs and risks, until the goods reached the buyer’s destination. The question was raised as to whether, while exporting goods on payment of IGST, the transaction value should include reimbursed expenses such as ocean freight, insurance, foreign import duties, delivery charges, and other costs incurred abroad prior to delivery, and whether IGST was payable on such expenses. It was clarified that the applicant did not act as a pure agent in respect of such expenses and that all costs were borne and recovered as part of the contractual arrangement under DDP terms. The matter was accordingly placed before the Authority for Advance Ruling (AAR).
AAR Held
The AAR held that in terms of the Section 15 of the CGST Act and Section 20 of the IGST Act, the value of supply includes all incidental expenses charged by the supplier to the recipient, including any amount charged for anything done by the supplier at or before the delivery of goods. It was observed that under DDP terms, the supplier bears all costs and risks until delivery at the buyer’s location, and since the applicant admittedly did not act as a pure agent, such expenses could not be excluded from the transaction value. It was further held that expenses such as ocean freight, insurance, foreign import duties, delivery charges, and other costs incurred abroad prior to delivery are intrinsically linked to the supply and are therefore includible in the taxable value for payment of IGST on exports. Accordingly, it was ruled that IGST is payable on the entire value, inclusive of such expenses.
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