Hit by freight tax, Indian perishable exporters feel the pinch

The additional Goods and Services Tax (GST) that became applicable on freight charges from 1 October has begun to pinch the Perishable shippers in India.

Stating that the freight charges are unaffordable due to the 18% tax on air freight and 5% tax on the ocean, trade groups representing reefer shippers are threatening to
suspend exports.

To exert more pressure on the government to return GST relief, which had existed by way of ad-hoc exemptions since 2017, the southern Indian body, All Kerala Vegetable, and Fruits Exporters’ Association has requested its members to halt exports from today.

According to a Cochin-based exporter, “Despite presenting an urgent plea to the union ministers, no decision has been taken in this regard and for the first time in two years, exports from India reported a 16.6% decline last month.”

The domestic reefer exporters are unable to compete with their counterparts from other low-cost countries like Sri Lanka, Pakistan, and Bangladesh, sources say.

Sources revealed that shipments of fruit, vegetables, meat, and seafood to the UK and the Middle East had declined in recent weeks, as freight costs soared.

While air freight rates out of India have tapered off amid slowing volumes – and are now hovering at about $1.75 per kg to the EU and $1.5 per kg to the Middle East for perishables – the GST has ended up eroding the pricing slide, according to industry sources.

The 18% levy triggers competitive disadvantages amid falling export orders, experts explain saying that the GST had come on top of an already lengthening credit-line curve and continually rising interest rates for exporters.

The tax burdens the trade community and has an impact on airlines, shipping lines, freight forwarders, and the industry, as a whole. Most nations including Australia and Singapore, have zero-rated exports and the experts believe that our government should reconsider its decision.
The tax is also pinching the Indian grape growers during their harvest season, as most of the exports are typically destined for the Netherlands, UK, and Germany.

“The government should look into the request of the export sector for continuing with the GST exemption for exports, which lapsed on 30 September, particularly as freight rates are still at much-elevated levels,” said A Sakhtivel, president of the Federation of Indian Export Organisations.

In the meanwhile, India’s air cargo capacity is continuing to scale up. IndiGo, the largest domestic private airline, operated its first dedicated international freighter service this week, between Kolkata and Yangon.

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