High seas sales, bonded warehouse transfers and Schedule III
Goods that are in India, but not yet in India for tax purposes.
Entry 8 of Schedule III provides that the supply of warehoused goods to any person before clearance for home consumption, and the 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 but before clearance for home consumption, shall be treated as neither a supply of goods nor a supply of services. High seas sales and in bond transfers are therefore outside GST, with integrated tax payable at the time of clearance by the last buyer on the customs value.
The two transactions
A high seas sale is a transfer by endorsement of the documents of title while the goods are in transit, after despatch from the port of origin and before clearance for home consumption. It is not a supply.
A supply of warehoused goods, that is goods deposited in a customs bonded warehouse, before clearance for home consumption, is likewise not a supply.
In both cases the integrated tax arises at clearance, payable by the person filing the bill of entry, on the value determined under the customs law, which includes the value at which the last transaction occurred where applicable.
The credit of that integrated tax is available to the importer of record who paid it, subject to the ordinary conditions.
The practical points
Documentation is the whole of it: the high seas sale agreement, the endorsed bill of lading, the commercial invoice chain, and the bill of entry showing the last buyer as the importer.
The value at clearance must reflect the last transaction. A high seas sale at a margin followed by a bill of entry at the original invoice value invites a customs valuation dispute rather than a GST one.
Rule 42 and 43 apportionment: because these transactions are outside supply rather than exempt, their treatment in the turnover ratio must be considered and documented.
For a trader whose business consists of such transactions, the credit position needs care, because there is no output tax on the transaction itself.
What to do on Monday
Keep the endorsement chain, the agreement and the bill of entry together for every such transaction.
Ensure the clearance value reflects the last transaction to avoid a customs valuation dispute.
Document the treatment of these transactions in the Rule 42 computation.
Review the credit position where such transactions form a large part of the business.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Is a high seas sale taxable under GST?
No. Entry 8 of Schedule III places it outside supply. Integrated tax arises at clearance.
Who takes the credit of the integrated tax?
The person who paid it on the bill of entry, subject to the ordinary conditions.
Does the margin on a high seas sale attract tax?
Not as GST on a supply. It affects the customs value at clearance.
Are in bond sales treated the same way?
Yes, supplies of warehoused goods before clearance for home consumption are within the same entry.
Do these transactions enter the Rule 42 turnover ratio?
They are outside supply rather than exempt, and the treatment should be computed and documented rather than assumed.
In this cluster
- Place of supply under GST: the full decision tree
- Intermediary services: characterisation, exposure and structuring
- Export of services: the five conditions and where claims fail
- Dharmendra M. Jani: the constitutional attack on intermediary taxation, and where it stands
- Mohit Minerals: ocean freight, composite supply, and the sentence that changed GST federalism
- Import of services and reverse charge under Section 5(3) of the IGST Act
- OIDAR services: registration, compliance and the 2023 amendment
- Bill to ship to transactions and Section 10(1)(b)
- Merchant trade and out and out supplies
- Goods transport agencies: reverse charge, the rate option and place of supply
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.