Tax on Carton Gift boxes and Shipping Charges

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Shobia (Querist)
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15 February 2023 We are selling Sarees online which attracts 5% GST, we are thinking of enabling the "Gift box" option where customer can choose that if they want to gift wrap the product.

We need to know the % for the Gift box (Carton box), and the % on shipping charges.

If Gift box attracts 18%, then Shipping attracts 18% or 5% (saree %)?

Arun Kumar Singh

Arun Kumar Singh (Expert)
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16 February 2023 GST will be applicable 18% on box.

Shobia

Shobia (Querist)
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20 February 2023 Hi Sir,
Thank you for your response, my query is, if Gift box attracts 18% then shipping also attracts 18% (higher tax rate) and if at all the supply is considered as Mixed then the Saree which is 5% now will also attract 18%?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 This is a **very relevant query** for e-commerce sellers bundling products and services like **gift wrapping and shipping**. Let's address your concerns clearly with **GST rules** and implications for **Sarees + Gift Box + Shipping**.

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## 🔍 Your Scenario:

* You sell **Sarees (5% GST)**.
* You want to offer a **gift box/wrapping** option (possibly at additional charge).
* You're charging **shipping** (delivery) separately.
* You're concerned about whether this leads to:

* **Mixed supply**, and
* Higher GST (18%) applying to the whole invoice.

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## ✅ Key Concepts in GST:

### 1. **Composite Supply**:

* **Naturally bundled** items where one is the **principal supply**.
* GST rate of the **principal supply applies** to the whole bundle.

Example: Saree + shipping → Saree is principal, GST = 5%.

### 2. **Mixed Supply**:

* **Artificially bundled** items sold together for a single price, each having different tax rates.
* **Highest GST rate applies** to the entire bundle.

Example: Saree + chocolate box (18%) sold as a gift hamper → Entire bundle taxed @18%.

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## 🧾 Application to Your Case

### A. **Gift Box Option – Optional Add-on**

If **gift wrapping is optional** and **charged separately**, then:

* **Saree**: 5% GST
* **Gift Box**: 18% GST
* **Shipping Charges**:

* If charged separately: **follows principal supply**, i.e., **5%** (as per CBIC Circular No. 47/21/2018-GST)
* If shipping is for gift box only: **18%**
* If bundled together as one price: Risk of **mixed supply** if not clearly separated

✅ **Best Practice**:

* Invoice clearly showing:

* Saree @ 5%
* Gift box (optional) @ 18%
* Shipping as a separate line linked to saree → charge 5%

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### B. **If Gift Box is Mandatory or Included in Price**

* If customer has **no choice**, and it's always included → could be treated as **composite or mixed supply**.

* If **gift box is incidental** → 5% applies to full value (composite).
* If it's a separate product (significant value), and **not naturally bundled** → risk of **mixed supply**, and **18% may apply to entire amount**.

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## ✅ Final Answer:

| Component | Tax Rate (if billed separately) |
| ---------------------------- | ------------------------------------------------ |
| Saree | 5% |
| Gift box/wrapping (optional) | 18% |
| Shipping (on saree) | 5% (if separately mentioned and linked to saree) |

### 🔐 Important:

Avoid combining all into **one single price** — keep items **separately shown in invoice** to avoid **mixed supply implications**.

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## 📌 Recommendation:

* Treat saree as **principal supply**.
* Keep **gift box as optional**, billed separately.
* Ensure **shipping is linked to saree**, not to the gift box.

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Let me know if you'd like a sample tax invoice or billing format to minimize GST exposure.

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