Applicability of GST by RCM in case of freight service availed for sending goods to customer
This query is : Resolved
Manoj Chauhan
(Querist)
06 August 2024
Dear Sir/Madam,
"A" sells goods to "B" company. The sale invoice contains freight charges.
GST is applied on whole of the amount (Basic + Freight charges)
Freight service was availed by "A" from "C" company.
"B" company makes payment to "A".
Now, "A" is required to make payment to "C" (freight service provider).
My question is: Whether "GST" would again be applicable (by RCM method) between the transaction of "A" and "C".
"A" sells goods to "B" company. The sale invoice contains freight charges.
GST is applied on whole of the amount (Basic + Freight charges)
Freight service was availed by "A" from "C" company.
"B" company makes payment to "A".
Now, "A" is required to make payment to "C" (freight service provider).
My question is: Whether "GST" would again be applicable (by RCM method) between the transaction of "A" and "C".
13 August 2025
Scenario Recap:
"A" sells goods to "B", and the sale invoice includes freight charges.
GST is charged on the total invoice value (goods + freight), and "B" pays "A".
"A" outsources freight service to "C" and pays "C" separately.
Your question: Does "A" need to pay GST under RCM on freight service availed from "C"?
Key GST Provisions to consider:
Freight on Goods Transport:
GST on freight services is generally taxable.
Freight service provided by a registered transporter is covered under GST.
Who is liable to pay GST on Freight Service?
If the freight service is provided by a registered GST transporter to a registered recipient, supplier ("C") charges GST normally, and recipient ("A") claims ITC.
No Reverse Charge applies if transporter is registered and GST is charged normally.
When is Reverse Charge Applicable?
Reverse Charge on freight services is applicable only if transporter is unregistered or if specific provisions mention RCM.
If freight is paid to an unregistered transporter (e.g., local transporters, drivers), then RCM applies on "A" to pay GST on freight service.
In your case:
Since "A" is paying freight service provider "C" separately, GST should be charged by "C" if registered.
"A" cannot charge GST again on freight under RCM if "C" is registered and charging GST.
If "C" is unregistered, then "A" must pay GST under RCM on freight service.
About freight charges included in sale invoice from "A" to "B":
It is correct to charge GST on total invoice value (goods + freight) if freight is charged to buyer.
This GST is on supply of goods and freight as part of composite supply.
"A" sells goods to "B", and the sale invoice includes freight charges.
GST is charged on the total invoice value (goods + freight), and "B" pays "A".
"A" outsources freight service to "C" and pays "C" separately.
Your question: Does "A" need to pay GST under RCM on freight service availed from "C"?
Key GST Provisions to consider:
Freight on Goods Transport:
GST on freight services is generally taxable.
Freight service provided by a registered transporter is covered under GST.
Who is liable to pay GST on Freight Service?
If the freight service is provided by a registered GST transporter to a registered recipient, supplier ("C") charges GST normally, and recipient ("A") claims ITC.
No Reverse Charge applies if transporter is registered and GST is charged normally.
When is Reverse Charge Applicable?
Reverse Charge on freight services is applicable only if transporter is unregistered or if specific provisions mention RCM.
If freight is paid to an unregistered transporter (e.g., local transporters, drivers), then RCM applies on "A" to pay GST on freight service.
In your case:
Since "A" is paying freight service provider "C" separately, GST should be charged by "C" if registered.
"A" cannot charge GST again on freight under RCM if "C" is registered and charging GST.
If "C" is unregistered, then "A" must pay GST under RCM on freight service.
About freight charges included in sale invoice from "A" to "B":
It is correct to charge GST on total invoice value (goods + freight) if freight is charged to buyer.
This GST is on supply of goods and freight as part of composite supply.
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