GST on recovery of freight
This query is : Resolved
02 July 2017
i sell goods of 28%gst and charge recovery of freight . what rate of gst should i charge on freight
03 July 2017
No GST charged on freight.
03 July 2017
mam, please explain why,. with section..
other people said that this will be a composite supply and gst will be charged 28%
27 July 2024
When dealing with the GST implications on the recovery of freight charges, it is important to understand the nature of the transaction and how GST applies to different components of the supply.
### **Understanding GST on Recovery of Freight**
1. **Nature of Freight Charges in a Supply:**
- **Composite Supply:** If the supply of goods and the transportation of those goods are treated as a single supply, then it could be classified as a "composite supply". In this case, GST would be applicable at the rate of the principal supply (which is the goods in your case).
- **Separate Supply:** If the supply of goods and freight charges are treated as separate supplies, the GST rate on freight would depend on the nature of the transport services and the service provider.
2. **GST Rate on Freight Charges:**
- **Freight by Goods Transport Agency (GTA):** If the freight is provided by a Goods Transport Agency (GTA) and you are not the GTA, the freight charges are subject to 5% GST under reverse charge mechanism (RCM). The recipient of the service (i.e., you, if you are not the GTA) must pay GST on such freight charges under RCM. You should mention this in your GST returns and pay the tax accordingly.
- **Freight Charged Separately:** If you are charging the freight separately and you are not a GTA, the GST rate applicable to freight depends on the nature of the service:
- **For Domestic Freight (not by GTA):** Typically, it would be 18% GST. You should confirm this based on the specific nature of your transport services.
- **For International Freight:** The applicable rate might vary, but it’s generally zero-rated for export.
3. **GST Rate on Composite Supply:**
- **Composite Supply Rate:** If the sale of goods and the freight charges are considered as a composite supply (i.e., freight is an integral part of the sale of goods), then the GST rate applicable to the entire composite supply (goods + freight) would be the rate of the principal supply.
- **For Example:** If you are selling goods at 28% GST and the freight charges are part of the composite supply, the entire supply (goods + freight) will attract GST at 28%.
4. **Section References:**
- **Section 8 of the CGST Act, 2017:** Defines composite supply and the treatment of such supplies, indicating that the GST rate applicable to the principal supply will apply to the entire composite supply.
- **Section 12 of the CGST Act, 2017:** Relates to the determination of the place of supply, which can also affect the GST rate on freight charges.
- **Notification No. 12/2017-Central Tax (Rate):** Lists various services and their applicable GST rates, including those for transport services.
### **Summary of GST Application on Freight Charges:**
1. **Separate Freight Charges:**
- **By GTA:** Subject to 5% GST under RCM if the recipient is not a GTA.
- **By Non-GTA:** Typically 18% GST, but this should be confirmed based on the specifics of the transport service.
2. **Composite Supply:**
- If freight charges are part of a composite supply, the GST rate applicable to the principal supply (e.g., 28% for goods) applies to the entire supply, including freight.
**Action Steps:**
1. **Determine the Nature of Supply:** Assess whether the freight is part of a composite supply or a separate service.
2. **Check the Service Provider:** If the freight is provided by a GTA or another service provider, verify the GST rate applicable to their services.
3. **Apply the Correct GST Rate:** Based on the nature of the supply and the service provider, apply the correct GST rate and ensure proper documentation in your GST returns.
For any specific scenarios or complex cases, consulting with a GST professional or tax advisor is recommended to ensure accurate compliance.
### **Understanding GST on Recovery of Freight**
1. **Nature of Freight Charges in a Supply:**
- **Composite Supply:** If the supply of goods and the transportation of those goods are treated as a single supply, then it could be classified as a "composite supply". In this case, GST would be applicable at the rate of the principal supply (which is the goods in your case).
- **Separate Supply:** If the supply of goods and freight charges are treated as separate supplies, the GST rate on freight would depend on the nature of the transport services and the service provider.
2. **GST Rate on Freight Charges:**
- **Freight by Goods Transport Agency (GTA):** If the freight is provided by a Goods Transport Agency (GTA) and you are not the GTA, the freight charges are subject to 5% GST under reverse charge mechanism (RCM). The recipient of the service (i.e., you, if you are not the GTA) must pay GST on such freight charges under RCM. You should mention this in your GST returns and pay the tax accordingly.
- **Freight Charged Separately:** If you are charging the freight separately and you are not a GTA, the GST rate applicable to freight depends on the nature of the service:
- **For Domestic Freight (not by GTA):** Typically, it would be 18% GST. You should confirm this based on the specific nature of your transport services.
- **For International Freight:** The applicable rate might vary, but it’s generally zero-rated for export.
3. **GST Rate on Composite Supply:**
- **Composite Supply Rate:** If the sale of goods and the freight charges are considered as a composite supply (i.e., freight is an integral part of the sale of goods), then the GST rate applicable to the entire composite supply (goods + freight) would be the rate of the principal supply.
- **For Example:** If you are selling goods at 28% GST and the freight charges are part of the composite supply, the entire supply (goods + freight) will attract GST at 28%.
4. **Section References:**
- **Section 8 of the CGST Act, 2017:** Defines composite supply and the treatment of such supplies, indicating that the GST rate applicable to the principal supply will apply to the entire composite supply.
- **Section 12 of the CGST Act, 2017:** Relates to the determination of the place of supply, which can also affect the GST rate on freight charges.
- **Notification No. 12/2017-Central Tax (Rate):** Lists various services and their applicable GST rates, including those for transport services.
### **Summary of GST Application on Freight Charges:**
1. **Separate Freight Charges:**
- **By GTA:** Subject to 5% GST under RCM if the recipient is not a GTA.
- **By Non-GTA:** Typically 18% GST, but this should be confirmed based on the specifics of the transport service.
2. **Composite Supply:**
- If freight charges are part of a composite supply, the GST rate applicable to the principal supply (e.g., 28% for goods) applies to the entire supply, including freight.
**Action Steps:**
1. **Determine the Nature of Supply:** Assess whether the freight is part of a composite supply or a separate service.
2. **Check the Service Provider:** If the freight is provided by a GTA or another service provider, verify the GST rate applicable to their services.
3. **Apply the Correct GST Rate:** Based on the nature of the supply and the service provider, apply the correct GST rate and ensure proper documentation in your GST returns.
For any specific scenarios or complex cases, consulting with a GST professional or tax advisor is recommended to ensure accurate compliance.
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