• Dated 23^rd April, 2026

DDP Export Costs to be Included in Transaction Value for IGST on export, even if reimbursed – Tamil Nadu AAR

Brief Facts

The applicant is a GST-registered manufacturer-exporter, undertook exports under Delivered Duty Paid (DDP) terms, wherein all costs such as ocean freight, insurance, foreign import duties, and delivery charges were borne by the supplier until delivery at the buyer's location.

The applicant sought a ruling on whether such reimbursed expenses should be included in the transaction value for payment of IGST on exports and whether IGST paid thereon is refundable.

Assessee's Contention

The applicant submitted that under DDP terms, the supplier is responsible for all costs and risks until delivery. It was submitted that as per Section 15 of the CGST Act, transaction value includes incidental expenses and duties charged before delivery. Further, the applicant clarified that it does not qualify as a "pure agent," and hence such expenses cannot be excluded from value. It was also contended that IGST paid on exports, including such expenses, should be eligible for refund under zero-rated supply provisions.

Department's Contention

The Department has contended that, in terms of Section 15 of the CGST Act, the value of supply is required to include all incidental expenses and any amount charged for activities undertaken prior to delivery. It is asserted that under Delivered Duty Paid (DDP) terms, the supplier assumes all costs and risks associated with the supply and does not qualify as a pure agent. Consequently, all such expenses are liable to be included in the value of supply for the purpose of levy of GST.

The Department has further contended that a clear distinction exists between valuation under customs law and valuation under GST, and that for the purpose of determining IGST liability, the valuation provisions under the CGST Act would prevail.

Court Held

The AAR held that all expenses incurred under DDP terms, including ocean freight, insurance, foreign import duties, delivery charges, and other related costs, even if reimbursed, must be included in the transaction value for the purpose of payment of IGST on exports.

Further, it was held that the question relating to refund of IGST is outside the jurisdiction of AAR and hence not answered.

BTA Comment

This ruling reinforces that under DDP exports, the supplier assumes full responsibility for delivery, making all pre-delivery costs part of the taxable value. The decision clarifies that the "pure agent" exclusion is not applicable in such cases, thereby expanding the scope of includible expenses under Section 15.

From a practical standpoint, exporters adopting DDP models must carefully evaluate pricing and tax implications, as inclusion of overseas costs could increase IGST outflow (albeit refundable). The ruling also reiterates jurisdictional limits of AAR by declining to rule on refund-related queries.

Case Reference

BEFORE THE AUTHORITY FOR ADVANCE RULING UNDER GST, TAMILNADU.

In re: Arjun Knit Wear

Order No. TN/11/ARA/2026 dated 06.02.2026

(2026) 41 Centax 229 (A.A.R. – GST – T.N.)

Author: Noor Jahan

Edited by: Sneha Nandi