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September 26, 2023

India’s shippers feel frozen out as perishable exports are hit by freight tax

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

Some trade groups, representing reefer shippers, have threatened to suspend exports, saying freight charges are “unaffordable” as a consequence of this tax: 18% on air freight costs; and 5% on the ocean.

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

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

The source said domestic reefer exporters were now unable to compete with their counterparts from other low-cost countries like Sri Lanka, Pakistan, and Bangladesh.

Mohnish Arora, head of perishables trade at Mumbai-based freight forwarder Jet Freight Logistics (JFL), said 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,” a fruit trader in Mumbai said.

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