Urgent - sales tax

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reshma (Querist)
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23 July 2011 Dear Sir,
Pls let me know in maharashta VAT will be charged by manufacturer also on transportation chgs / freight? if yes than under which clause & rule?
One of our customer in Maharashta giving our payment by deducting tax on freight / transportation chgs. According to them their is not such rule, to charge vat on freight or tpt. chgs in maharashtra.

pls. guide
Tnks

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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25 July 2011 Miss Reshma,
Under all the VAT laws in India freight and transport charges are not liable for VAT.Please do not charge VAT on freight and tpt expenses.You will be penalised for it.Your customer is correct in not paying it.This is given in the VAT rules on computation of txable turnover.
MJK

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reshma

reshma (Querist)
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28 July 2011 Dear Sir,
As per ur suggestion vat will not be charged on freight & tpt chgs in maharashtra. But one of our well wisher gave us detail of vat rule under which vat will be charged on freight & tpt chgs. here is that rule. Pls cross the same & give me proper guideline, I am confused now.
Rule : (25) ?sale price? means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged.
Explanation I.? The amount of duties levied or leviable on goods under the Central Excise Act, 1944 (1 of 1944) or the Customs Act, 1962 (52 of 1962) or the Bombay Prohibition Act, 1949 (Bom. 25 of 1949), shall be deemed to be part of the sale price of such goods, whether such duties are paid or payable by or on behalf of, the seller or the purchaser or any other person.
Explanation II.? Sale price shall not include tax paid or payable to a 16[seller

Tnks.
Reshma

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Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Here’s a clear explanation regarding VAT on freight/transportation charges in Maharashtra, based on your query and the Rule 25 you shared:

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### Key Points:

1. **Rule 25 Maharashtra VAT Act - Sale Price Definition:**

* The **sale price** includes “any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof” — this *can* include packing, handling, or similar charges.
* However, **it specifically excludes the cost of insurance for transit or installation**, if separately charged.
* **Freight or transportation charges are not explicitly mentioned here as included in sale price**, nor are they covered under these “charges done by seller” unless the seller itself provides the transportation.

2. **Freight / Transportation Charges VAT Applicability:**

* If the **freight/transportation charges are paid separately by the buyer directly to a third-party transporter**, then such charges are **not subject to VAT by the manufacturer or seller**.
* If the **seller includes freight/transportation as part of the invoice and collects it from the buyer**, VAT applies on such freight only if the seller themselves provides the transport service.
* If the seller *does not* provide transportation service and just collects freight charges as a pass-through, typically no VAT is charged on freight.

3. **Practice in Maharashtra VAT:**

* **Generally, freight and transportation charges are exempt from VAT when billed separately** or collected by a third party.
* If the transportation is done by the seller as part of the sale contract, then VAT on freight might be applicable.
* Many customers refuse to pay VAT on freight, claiming it is outside VAT scope if transportation is by third party.

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### Summary:

* If your freight/transportation charges are **billed separately and you are not providing transportation service**, **you should not charge VAT on freight**.
* If you include freight charges in your invoice as part of sale price **and you provide transportation service yourself**, VAT on freight may be applicable.
* Your customer’s deduction of VAT on freight may be justified if transportation is third-party or separately billed without VAT.

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### Suggested Action:

* Review your invoicing method for freight.
* Clarify if transportation is by your company or a third party.
* Adjust VAT charges accordingly.
* Keep documentation to support your position.

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If you want, I can help draft a letter/email explaining this to your customer or provide further detailed references from Maharashtra VAT laws. Would you like me to?

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