What is High Sea Sales (HSS)?
‘High Sea Sales’ is a common trade practice where the original importer sells the goods to a third
person before the goods are entered into customs clearance i.e. before filing the first bill of entry, either for home consumption or for warehousing, as the case may be.
In other words, High Sea Sales (HSS) refer to a type of transaction in which goods are sold while they are in transit on the high seas before entering India’s customs territory.
What Happens in HSS?
1. HSS occurs after goods are shipped from the exporting country but before they reach Indian customs or enter Indian territory.
2. The original importer sells the goods to another party while they are in transit.
3. The final buyer becomes the official importer. He will pay customs duties and any applicable IGST when the goods are cleared through Indian customs.
4. The High Sea Sale Agreement is the legal document that records this transaction.
GST Applicability on High Sea Sales (HSS)
High Sea Sales are considered as non-taxable supplies under the GST regime. This is because the sale occurs outside the customs territory of India, i.e., before the goods enter Indian territory or are cleared through customs.
GST is applicable only on supplies of goods and services made within the taxable territory of India. In the case of HSS, the transaction is deemed to have taken place outside India’s customs limits and, therefore, is not subject to GST.
However, While GST does not apply to the HSS transaction itself, IGST is levied when the goods are imported into India. The final buyer (importer) is required to pay IGST along with customs duties at the time of clearing the goods through Indian customs.
How to report High sea sales in GST Returns?
Since HSS transactions are not considered as taxable supplies under GST (as the goods have not yet entered the customs territory of India), they are excluded from taxable turnover.
Reporting in GSTR-1:
The value of the HSS transaction should be reported as “Non-GST Supply” in Table 8 of GSTR-1 (Outward Supplies).
HSS transactions should be reported in Table 8 (Nil Rated, Exempt, and Non-GST Supplies) under the “Outward Supplies” section. Ensure to classify the value of HSS transactions as “Non-GST Supply”
Documentation required for high sea sales
Here is a list of documents required to get an HSS clearance:
The following documents are typically required to execute and support a High Sea Sales (HSS) transaction:
High Sea Sales Agreement
A formal agreement between the original importer (seller) and the buyer stating the terms and conditions of the sale while the goods are in transit. Must be signed before the goods reach Indian customs.
Commercial Invoice
Original commercial invoice from the foreign supplier issued to the original importer.
A separate invoice is also required from the seller (original importer) to the HSS buyer reflecting the HSS transaction.
Bill of Lading (BL)
Endorsed copy of the Bill of Lading (in favor of the buyer) to indicate the transfer of ownership. The endorsement should include the details of the HSS buyer.
Import Documents
- Packing List: Detailing the contents of the shipment.
- Bill of Entry: Should be filed in the name of the HSS buyer as the final importer.
Letter of Credit (if applicable)
If the transaction involves payment through a letter of credit, relevant documents supporting the credit arrangement.
Insurance Certificate
An insurance policy covering the goods during transit should be assigned to the buyer if it is included in the sale.
Shipping Documents
Other relevant shipping documents such as Airway Bill (if by air), Freight Bill, or Delivery Order.
Customs Documentation
Any pre-filed customs documents (if applicable) or amendments reflecting the change in importer details.
Proof of Payment
Payment proof from the buyer to the seller for the HSS transaction.
Proper documentation ensures smooth customs clearance and compliance with GST and import regulations.