Freight charge in invoice as per gst

Arun Kumar (B.Com) (34 Points)
Replied 03 July 2017

The question has been framed perfectly and answer to the same with invoice format is very much needed. Please help.

1 Like

CA Shivam Agrawal (4 Points)
Replied 05 July 2017

Same issue is with me also. This question must be answered

Arun Kumar (B.Com) (34 Points)
Replied 05 July 2017

I have been interacting with various people in the field. The feedback that has been received on our doubt is as follows:

a) More or less, charge the freight amount in the invoice.

b) Collect GST on the same as per the rate of article invoiced.

You are now good to go. Hope it helps. I have started to a/c accordingly.

Y

1 Like

rahul (MD) (54 Points)
Replied 06 July 2017

I appreciate the revert in this matter, Yes I have done the same for time being. Since input credit is involved i wanted to know the correct format to avoid any issue in future.

Further, if i evaluate from the customers point of view, he will end up paying 13% more tax on the freight amount if the freight is paid by the supplier. Because if he buys on to pay basis the transporter will charge him only 5%. Whereas now i will charge him 18% since the goods that i sell come under 18% tax rate. So, i feel its illogical but logic has no value in some rules and acts sometimes.

I am just looking after a clause in GST act that clarifies this clearly. Further, How to link the output and input tax to avail input tax credit is a big confusion now.

S.S Bisht (Accounts Manager) (43 Points)
Replied 07 July 2017

As per my Knwoledge & Disscuss with Excise deptt

In case of Trnasportation

1- If Transportation Charge me say Rs.1000. In this case i have to pay IGST(5%) in Reverse Charge basis & i will get credit of this amount.

2- in Invoice i will charge only Rs.1000 Without GST Charges.

3- You have to Charge Freight Seprately In Invoice but without GST.

4- If you include Freight Chrges in your product value than only GST will b applicable on your freight also.

rahul (MD) (54 Points)
Replied 07 July 2017

Thanks for sharing the knowledge. However, if you think deep the logic still not right

Now let us consider the logic of GST or Taxation on goods or service. The concept is the transaction value should be Taxed whenever there is Movement of goods or Service provided by one entity to other (except for goods and services that are exempted from tax).

Let us consider your example, i.e. you want to send goods from Mumbai to Delhi.

1. The transporter charges you 1000 and mentions 2.5% CGST and 2.5% SGST to be padi on freight amount as per Reverse Charge Mechanism (it will never be IGST as the both the transporter and supplier belong to same place)

2. Now i raise an invoice and i just put freight charges as 1000 and dont apply any tax on it.

3. So now, if i get the credit of 5% GST i.e. (2.5% CGST and 2.5% SGST ) that I paid VIA Reverse Charge mechanism IT eventually means that the net tax paid on the freight in these transaction is Zero. Then what is the point of taking tax as per reverse charge mechanism or even charging tax.

4. we have to be very careful with documents as input credit is involved. If any problem in documentaitons like invoice or linking each expense with the invoices then the input credit will be delayed.

I am still seeking clear concrete answers for these queries based on any clause in the act so that we can do business without any future risks.

1 Like

MAYANK MEHRA (PARTNER) (2 Points)
Replied 07 July 2017

The terms of delivery will matter if supplier is responsible for paying frieght to transporter then material value including transport charges is subject to GST. The supplier will pay gst on transport charges and claom input on same. If receipt is liable to pay transport charges i.e. to pay basis then no question of gst on frieght; buyer will pay gst on transport charges on rcm basis and claim input of same.

CA CS Manmath Thakur (CA, CS, M. Com.) (71 Points)
Replied 08 July 2017

In relevant to this case, We also sent goods to our customer and collects transport charges by adding in our invoice. We are also required to pay GST (under RCM) on Transport Charges. My question is 1 Whether we are required to collect GST on transport charges (as mentions in our invoice) 2 Can we take credit of GST ( paid under RCM) on Transport Charges.

Rahul Agrawal (Student CA IPC / IPCC) (36 Points)
Replied 08 July 2017

Your answer to question 1

Yes freight will be seperatly shown in the invoice

Rate on the freight charges will be the GST rate of supplies you a making under GST invoice. you will be more clear by reading the value of supply on this link (https://www.knowyourgst.com/article/how-to-calculate-the-taxable-value-on-tax-invoice-under-gst-12/)

Ifyou add the profit element in the value of freight then you will become a intermediary between the transporter and resipiant of goods for which the profit element added to the freight will be called as comission which is a seperate service on which GST shall be charged

If you provide Freight amount in the invoice then there is no need to add tax component in such freight amount as you will get full credit of such tax paid.( do not apply logic becaue purpose of introduction of reverse charge mechenism is only the identification of the entities which are aviling the services of GTA just like the concept of TDS)

Your answer to question no 2

Full credit of taxpaid(2.5+2.5) will be available to the recipiant of service under reverse charge if such service is used for business purpose

Ankur Kumar (Accountant) (85 Points)
Replied 08 July 2017

1.Guys i want to know that TDS rate is as same as earlier or there is change in TDS rate under different section 194i,194j19c etc....please i am confused ?

2. Want to know that if we are importing some goods fom china and selling it at intra or interstate bases then how we can book purchase in our system as IGST component is there, recently wehave received shipment from china via DHL they raised an invoice to us by mentioned IGST on DHL Invoice, so can we take IGST credit from DHL or supplier hwo can we evaluate it in our systems.

Kindly give solution @ mention mail id accounts @ shinecyberspace.com

rahul (MD) (54 Points)
Replied 08 July 2017

Originally posted by : Rahul Agrawal

Your answer to question 1

Yes freight will be seperatly shown in the invoice

Rate on the freight charges will be the GST rate of supplies you a making under GST invoice. you will be more clear by reading the value of supply on this link (https://www.knowyourgst.com/article/how-to-calculate-the-taxable-value-on-tax-invoice-under-gst-12/)

Ifyou add the profit element in the value of freight then you will become a intermediary between the transporter and resipiant of goods for which the profit element added to the freight will be called as comission which is a seperate service on which GST shall be charged

If you provide Freight amount in the invoice then there is no need to add tax component in such freight amount as you will get full credit of such tax paid.( do not apply logic becaue purpose of introduction of reverse charge mechenism is only the identification of the entities which are aviling the services of GTA just like the concept of TDS)

Your answer to question no 2

Full credit of taxpaid(2.5+2.5) will be available to the recipiant of service under reverse charge if such service is used for business purpose

Thanks for your revert...ofcourse costing is done considering the Input tax that can be availed by us. i.e if the transporter charges us 1000 Rs + 2.5% CGST + 2.5% SGST then we just put 1000 + 18% GST in the invoice and not include the tax paid by us via reverse charge as we get it back. Yes if the idea to tax under reverse charge is for identification of entities then it makes sense.

will he get the refund of the 18% Tax charged on the freight by me in the invoice?? because if not, then he is actually paying 18% tax insted of 0 % as in case of the freight paid by the buyer the 5% tax amount can be claimed back.

CA CS Manmath Thakur (CA, CS, M. Com.) (71 Points)
Replied 10 July 2017

Thanks for your reply ...................

pooja kotecha (employer) (25 Points)
Replied 13 July 2017

Hi,

Transporter gets GST tax amount.so what should he do for it? can he also get refund? and ge gets the refund then how can u also get the refund for the same.I guess u can get ITC for it and you should charge it from ur customer and he is liable to pay as he is the last receiver of the service

Amit Khandelia (29 Points)
Replied 28 July 2017

Mr rahul ... U got everything right from what has been explained here by Rahul Agrawal. Except that... When u r charging freight in the invoice.. u have to add it on as is basis.. and not add gst on the freight component as it will not be considered as value of supply.

So your concern of "refund by ur client" and other issues raised by u in your last paragraph, is resolved.

Hope this clarifies.

Freight charge in invoice as per gst

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