GST on Export Expenses Under DDP Terms: TN/11/ARA/2026
The Tamil Nadu Authority for Advance Ruling decided that all costs incurred under DDP export terms must be included in the taxable value.
- Ruling
- Advance Ruling No. 11/ARA/2026, dated 06.02.2026
- Dated
- 06 Feb 2026
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Arjun Knitwear asked if DDP export costs are part of the taxable value.
- The Authority ruled all destination-based expenses must be included in the transaction value.
- The Authority declined to rule on whether these costs are eligible for refunds.
In short
The company asked if expenses like ocean freight and foreign import duties, paid under Delivered Duty Paid (DDP) terms, should be included in the value of goods when paying Integrated Goods and Services Tax (IGST).
What has changed
How it worked before
Many exporters assumed that costs incurred abroad, such as foreign duties or delivery charges, could be excluded from the taxable value as reimbursements or pure agent expenses.
What has changed
The Authority confirmed that because the exporter bears all risks and costs until the final destination under DDP terms, these expenses are part of the price paid for the goods. This means you must pay IGST on the total invoice value, including all these incidental costs, rather than just the base price of the goods.
Who this affects
Exporters who sell goods under DDP terms and pay for shipping, insurance, and foreign duties on behalf of their buyers.
An example
A textile exporter ships goods to Germany under DDP terms, paying for ocean freight and local delivery. They previously excluded these costs from their IGST calculation, treating them as separate reimbursements. Based on this ruling, they should now include these costs in the total transaction value when calculating IGST.
What you should do
Review your export invoices to ensure IGST is calculated on the full DDP value. Remember that this ruling only applies to the company that asked; your local tax officer may have a different view, so consult your tax advisor before changing your billing practices.
If you do nothing
If you exclude these costs and the tax department disagrees, you may face a demand for unpaid IGST plus interest and penalties. Relying on a ruling that does not apply to your specific business can lead to costly disputes with your local tax officer.
The terms explained
- Delivered Duty Paid (DDP)
- A shipping arrangement where the seller takes on all responsibility, costs, and risks for delivering goods to the buyer's location, including paying import duties.
- Transaction Value
- The total price actually paid or payable for the goods, which serves as the base amount for calculating the tax due.
- Pure Agent
- A person who incurs costs on behalf of a client and receives the exact amount back as a reimbursement, without adding a profit margin or taking on the risk of the service.
The ruling in detail
Authority for Advance Ruling
M/s. Arjun Knit Wear
Advance Ruling No. 11/ARA/2026, dated 06.02.2026 · Tamil Nadu
Questions before the authority
- When goods are exported with IGST payment, should the transaction value include reimbursed expenses such as ocean freight, insurance, foreign import duties, delivery charges, and other costs incurred abroad until the goods reach their destination under DDP terms, and should IGST be paid on these expenses?
- If IGST is applicable on the above-mentioned expense, can it be refunded in accordance with the provisions of the GST Act, 2017?
Facts
The applicant is a garment manufacturer exporting goods under Delivered Duty Paid (DDP) terms. Under this arrangement, the applicant bears all costs and risks, including ocean freight, insurance, and foreign import duties, until the goods reach the buyer's destination. These costs are included in the invoice value charged to the foreign buyer.
Ruling
| Question | What the authority ruled |
|---|---|
| Inclusion of DDP expenses in transaction value | Yes, all expenses are liable to be included in the transaction value. In terms of Section 15 of the CGST Act, 2017, read with Section 20 of the IGST Act, 2017. |
| Refundability of IGST on DDP expenses | Not answered. The Authority stated that matters pertaining to refund are outside the purview of the Authority for Advance Ruling. |
The Authority ruled that all expenses incurred by the applicant under DDP terms until the goods reach the buyer's destination are liable to be included in the transaction value for the purpose of payment of IGST. Regarding the second question on refund, the Authority held that it is outside the scope of the Advance Ruling and therefore not required to be answered.
Reasoning
The Authority relied on Section 15(2)(c) of the CGST Act, 2017, which mandates the inclusion of incidental expenses charged by the supplier to the recipient at or before the time of delivery in the transaction value. It observed that under DDP terms, the applicant is not acting as a pure agent, as they bear all risks and costs until the final destination. Consequently, these costs form part of the price actually paid or payable for the supply. The Authority further noted that it lacks jurisdiction to rule on refund claims under Section 97(2) of the CGST Act.
Provisions relied on
- Section 15 of the CGST Act, 2017
- Section 20 of the IGST Act, 2017
- Section 97(2) of the CGST Act, 2017
For the practitioner
This ruling clarifies that for exporters operating under DDP terms, all destination-based costs must be **included in the transaction value** for IGST payment purposes. It confirms that such expenses cannot be excluded as pure agent reimbursements. Practitioners should note that the Authority **declined to rule on refund eligibility**, leaving that issue to be determined by the jurisdictional refund authorities.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/1-arjun_knit_wear_aar_order_1.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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