High Seas Sales under GST — Treatment, Documents and Examples

High Seas Sales under explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A high seas sale is a sale of imported goods in transit, before a bill of entry is filed. Under paragraph 8(b) of Schedule III to the CGST Act it is neither a supply of goods nor of services, so no GST applies to the sale itself. IGST is levied once, on the final buyer, at customs clearance.

What a High Seas Sale Is

Goods are shipped from abroad to an Indian importer. While they are still on the water — after despatch from the origin port but before a bill of entry for home consumption is filed in India — the importer sells them on to another Indian buyer. Title passes not by physical delivery but by endorsement of the documents of title, ordinarily the bill of lading.

The buyer then files the bill of entry in its own name, pays customs duty and IGST, and takes delivery. The original importer never clears the goods.

Commercially this is used to avoid double handling, to let a trader arrange a sale while goods are already moving, and to let the end user become the importer of record so that duty credits land with the party who can actually use them.

The GST Position

Two provisions do the work.

Schedule III, paragraph 8(b) to the CGST Act — inserted with effect from 1 February 2019 — provides that supply of goods by the consignee to any other person, by endorsement of documents of title, after the goods have been despatched from the port of origin outside India but before clearance for home consumption, shall be treated as neither a supply of goods nor a supply of services.

The consequence is clean: the high seas sale is outside the charge of GST altogether. It is not an exempt supply and not a zero-rated supply — it is outside the scope. Before that amendment the same outcome was reached through CBIC clarifications confirming that IGST on such transactions is levied only once, at the time of importation.

Section 5(1) of the IGST Act, read with Section 3(7) of the Customs Tariff Act, then levies IGST on the import itself, collected at the point of customs clearance from the person filing the bill of entry.

Who Pays What

Valuation — Which Price Counts

Customs assesses on the transaction value for the import. Where a genuine high seas sale has occurred and is properly evidenced, the price paid by the last buyer under the HSS agreement is the relevant transaction value, and the assessable value is built up from there with freight, insurance and the prescribed additions.

The HSS margin therefore enters the duty base. Where the chain has multiple sales, the final HSS price governs, and the full chain of agreements must be available for the assessing officer.

Worked Example

A Mumbai trading company imports machinery from Germany at USD 100,000 CIF. While the vessel is in transit it sells the consignment to a Pune manufacturer at USD 108,000 on high seas sale terms.

• The Mumbai company charges no GST on the ₹-equivalent of USD 108,000 — Schedule III applies.
• The Pune manufacturer files the bill of entry in its own name and GSTIN.
• Customs assessable value is built on USD 108,000, the HSS price, converted at the notified exchange rate, plus prescribed additions.
• Basic customs duty, Social Welfare Surcharge and IGST are computed on that base and paid by the Pune manufacturer.
• The Pune manufacturer takes input tax credit of the IGST against its own output liability.
• The Mumbai company's HSS margin is business income, taxable under income tax, but carries no GST.

Documentation Customs Expects

1. High seas sale agreement between the HSS seller and buyer, dated after the sailing date and before the bill of entry date — this dating is checked.
2. HSS invoice from the seller to the buyer, in foreign currency or INR as agreed.
3. Endorsed bill of lading transferring title to the buyer.
4. Original commercial invoice and packing list from the overseas supplier.
5. Certificate of origin, insurance certificate and other shipment documents.
6. Chain of agreements where there has been more than one high seas sale.
7. Bill of entry filed in the final buyer's name and GSTIN.

Where High Seas Sales Go Wrong

• Dating. An agreement dated after the bill of entry, or before the vessel sailed, defeats the transaction. The window is narrow and non-negotiable.
• No endorsement. Title must actually pass by endorsement of the document of title. A bare invoice is not enough.
• GST charged in error. Charging IGST on the HSS sale creates a wrongly collected tax and a credit the buyer cannot properly claim.
• Wrong GSTIN on the bill of entry. Credit follows the GSTIN on the bill of entry. If the wrong entity is named, the IGST credit is stranded.
• Confusing HSS with merchanting trade. Merchanting trade involves goods that never enter India at all and is governed by the RBI framework. A high seas sale ends with the goods being cleared into India.

Practical Tips

• Prepare the HSS agreement template in advance and fill it on the day the sale is agreed, so the date sequence is defensible.
• Have the endorsement on the bill of lading done properly by the party holding title, not by a freight forwarder.
• Tell the customs broker at the outset that the consignment is on high seas sale — the bill of entry must be filed correctly the first time.
• Keep the entire chain of agreements with the shipment file; assessment queries can come well after clearance.
• Where the same goods are sold on twice, verify each seller's title before endorsing further.

Related Services & Guides

• Merchanting Trade Rules and RBI Guidelines
• Bill of Entry — Import Documentation
• Merchant Exports under GST
• More Guides