Taxation of excess ocean freight etc

We are exporting Machinery equipments under CIF / CFR delivery terms and making a very good profit margin under the heads Freight and Insurance vis a vis respective amount actually declared in Shipping Bill. This profit margin is in addition to our normal business profit wrt cargo parcel invoicing.

Does it anyway violate Customs, FEMA, Income Tax Rules?

Kindly guide.

Thanks & Regards,

Jayanta Bandyopadhyay 

West Bengal 

28.01.2023

Replies (4)
Quick Summary
This discussion explores the tax implications of including profit margins within freight and insurance costs for machinery exports under CIF/CFR terms. While it's common to build profit into these charges, the core concern is whether this practice violates Indian Customs, FEMA, or Income Tax regulations. The advice given suggests that while profit on freight and insurance is generally taxable as business income in India, accurate declaration of goods on shipping bills is crucial to avoid penalties under Customs and FEMA.

In general, CIF  and CFR delivery terms require the seller to arrange and pay for the transportation of goods up to the port of destination, as well as the cost of insurance. It is not uncommon for sellers to include a profit margin on these costs as part of the overall sale price of the goods.

However, it is important to note that the Indian Customs regulations and Foreign Exchange Management Act (FEMA) require that the value, descripttion, and quantity of goods declared in the shipping bill and other export documents match the actual goods being exported. Misrepresenting or undervaluing the goods on export documents can result in penalties and fines under Customs and FEMA laws.

As for Income Tax rules, any profit made from the export of goods is generally considered as income from the business and is subject to income tax.

Many thanks.

Please confirm whether normal business profit is the similar alike with hidden profit embedded with freight & insurance heads.

 

Taxation of overseas remittance is not possible.

Sir

I  am talking about income tax of our profit in India.

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