Freight to pay basis and gst valuation

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RUSHI GSTM (Querist)
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14 April 2017 In the case of Freight is to pay basis is the freight charges is a part of Transaction value and as per GST Valuation is it part of Transaction value and tax is applicbale or not???

Guest

Guest (Expert)

14 April 2017 The transaction value shall include freight charges and GST will be paid on it accordingly

RUSHI GSTM

RUSHI GSTM (Querist)
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04 May 2017 Respected Sir, I am not agree with your valuable reply. Because if A is a Seller and B is a Buyer if Freight is paid by Buyer to pay basis is not bear by Seller.

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RUSHI GSTM

RUSHI GSTM (Querist)
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05 May 2017 OK then can you explain as per GST provisions How it is a part of T.V.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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25 July 2024 In GST (Goods and Services Tax) regime, the treatment of freight charges is crucial in determining whether they are included in the transaction value and hence attract GST. Here’s how it works:

### Freight to Pay Basis

When freight charges are on "freight to pay" basis, it means that the buyer is responsible for paying the freight charges directly to the transporter. In such cases:

1. **Inclusion in Transaction Value:**
- As per GST valuation rules (specifically under Section 15 of the CGST Act, 2017), any amount that the supplier is liable to pay in relation to the supply of goods or services is included in the transaction value.
- If the supplier arranges for the transportation and charges the buyer for the freight separately, then the freight charges are considered part of the transaction value.
- Therefore, if the supplier invoices the buyer for the cost of goods plus separately mentioned freight charges, both amounts together form the transaction value for GST purposes.

2. **GST Applicability:**
- GST is applicable on the total transaction value, which includes the value of goods supplied plus any other amount charged by the supplier like freight charges.
- The rate of GST applicable would depend on the nature of the goods or services being supplied and the rate specified in the GST tariff.

### Example:

Let's say a supplier sells goods to a buyer for Rs. 1,00,000 and arranges for transportation (freight charges) costing Rs. 5,000. The invoice would look like this:

- Value of goods: Rs. 1,00,000
- Freight charges: Rs. 5,000
- Total invoice amount (Transaction value): Rs. 1,05,000

GST would be applicable on the total invoice amount of Rs. 1,05,000, which includes both the value of goods and the freight charges.

### Conclusion:

Under GST, if freight charges are separately mentioned and are part of the supply of goods or services, they are included in the transaction value. The GST is then applicable on the total transaction value, which comprises the value of goods plus any other charges such as freight charges that are incurred as part of the supply. It’s important for suppliers to clearly indicate and separately mention these charges on the invoice to ensure compliance with GST regulations.