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VAT ON FREIGHT AMT

Santosh Shetty (IPCC, Asst Manager) (200 Points)

25 July 2008

Dear Sir,

One of my client is charging MVAT on freight charges in the tax invoice. I have some confusion - should we charge VAT on freight amt which we are showing seperately in the same Invoice? Also under which gruoup will it (freight & packaging) come I mean under Sales account or direct incomes.

Awaiting for your reply.

Thanks & Regards,

Santosh

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15 Replies

Sathishkumar (Proprietor) (67 Points)
Replied 25 July 2008

Originally posted by :Santosh

Dear Sir,

Vat covered only the cost of the goods sold not to freight, packing etc.,

Therefore the freight and packing charges not included in the vat. This may shown in the invoice ofter the vat amount in seprately.

The freight and other charges are other income only.
One of my client is charging MVAT on freight charges in the tax invoice. I have some confusion - should we charge VAT on freight amt which we are showing seperately in the same Invoice? Also under which gruoup will it (freight & packaging) come I mean under Sales account or direct incomes.
Awaiting for your reply.
Thanks & Regards,
Santosh

Santosh Shetty (IPCC, Asst Manager) (200 Points)
Replied 25 July 2008

Originally posted by :Sathishkumar
"	Originally posted by :Santosh " Dear Sir, Vat covered only the cost of the goods sold not to freight, packing etc., Therefore the freight and packing charges not included in the vat. This may shown in the invoice ofter the vat amount in seprately. The freight and other charges are other income only. One of my client is charging MVAT on freight charges in the tax invoice. I have some confusion - should we charge VAT on freight amt which we are showing seperately in the same Invoice? Also under which gruoup will it (freight & packaging) come I mean under Sales account or direct incomes. Awaiting for your reply. Thanks & Regards, Santosh "thank you very much sir	"

C.A Alok Mukherjee (service) (462 Points)
Replied 29 July 2008

If you read the definition of "sale price" as defined in your State VAT Act, it is clearly stated that VAT will be charged on this amount. It is not relevant whether you show it separately or not. Before the introduction of VAT, "sale price" is to include essentially the pre-delivery charges. When it was post delivery, there would not be ant tax. The same is still valid for CST. But, VAT Act, is specific about freight charges.

Austin Strickland (MM) (22 Points)
Replied 17 August 2009

Originally posted by :Santosh
"	Originally posted by :Sathishkumar " Originally posted by :Santosh " Dear Sir, Vat covered only the cost of the goods sold not to freight, packing etc., Therefore the freight and packing charges not included in the vat. This may shown in the invoice ofter the vat amount in seprately. The freight and other charges are other income only. One of my client is charging MVAT on ocean freight charges in the tax invoice. I have some confusion - should we charge VAT on freight amt which we are showing seperately in the same Invoice? Also under which gruoup will it (freight & packaging) come I mean under Sales account or direct incomes. Awaiting for your reply. Thanks & Regards, Santosh "thank you very much sir"	"

hey thanks for the information..

really appreciate..

MAHESH (ACCOUNTANT) (823 Points)
Replied 17 August 2009

I agree with Mr. Satishkumar, go ahed

Edinburg (SEO) (22 Points)
Replied 29 June 2010

By defining Freight Charges as an inventory item enables the AutoAccounting to treat this item as a Freight item and use freight Account rather than Revenue Account for the Freight Charges. If you are not implementing Oracle Order Entry than you can always pick this new item as a line and Oracle Receivables will calculate the Tax on this freight item as it does for any other item. Intermodal Services...

inder gupta (accountant) (41 Points)
Replied 02 November 2010

on how much amount of sale the vat amount should shown seprateley

inder gupta (accountant) (41 Points)
Replied 02 November 2010

If somebody have a formate of hotel industry . Please Provide me. I will very thankful

Ravi Prasad (Self employed) (148 Points)
Replied 08 November 2010

Please refer to the latest Supreme Court judgement in India Meters case. The freight and insurance are part of the sale price and hence VAT is leviable on the same, whether it is charged separately or not. Hence please read again.

prasanna kishore (accounts excutive) (36 Points)
Replied 19 February 2011

Dear sir

can i take vat on freight amount ?

which act is describe this provision,

MONIL SANGHRAJKA (ACCOUNTS EXECUTIVE) (21 Points)
Replied 05 September 2011

PLEASE CLEAR ME , WHETHER I HAVE TO CHARGE VAT ON P&F OR NOT. AND THE SAME THING IN CST ?

YOUR REPLY WILL BE HIGHLY APPRECIATE !

pradeep kumar reddy (Article Student) (24 Points)
Replied 29 November 2012

Chargeable of VAT on Freight Charges is based on contract If Sellers Obligation is to transfer property in goods at Factory Place, no need to charge vat on Freight Charges. If Sellers Obligation is to transfer property in goods at Buyers Place, Vat need to charge on Freight Charges.

Dear Santosh

If seller's obligation is handing over goods to buyer at factory place, but however seller is providing Transport Service and collecting Freight Charges from buyer , here freight charges are treated as Direct Income.

If The contract between the assessee and its purchaser specifically stipulated that the sale was not completed at the factory gate and the transfer of property in the goods would take place at the establishment of the buyer,under an obligation to transport the goods to the place of the buyer and transfer of property in the goods took place only at the establishment of the buyer, the Supreme Court held, that the freight charges recovered by the seller from the buyer would form part of the sales turnover.

If any wrong in my arguement please rectify me.