var rate applicability

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Mulraj patel

Mulraj patel (Querist)
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12 April 2016 Is VAT rate applicable on delivery charges or only value of goods?

Mulraj patel

Mulraj patel (Querist)
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12 April 2016 plz reply urgent

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 The applicability of **VAT on delivery charges** depends on the **nature of the delivery and how it's structured in the invoice**. Here's a clear explanation:

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### 📦 **When VAT is Applicable on Delivery Charges:**

VAT **is applicable on delivery charges** if:

1. **Delivery is part of the sale** (i.e., the seller undertakes to deliver the goods to the buyer).
2. **Charges are included in the invoice** as part of the sale value.
3. **Ownership of goods is transferred at the buyer's location**.
4. **Freight is not charged separately or is bundled with the cost of goods**.

In this case, delivery charges are treated as part of the **"sale price"** under most VAT laws, and VAT is levied on the **total amount**, including delivery.

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### 🚚 **When VAT is *not* applicable on Delivery Charges:**

VAT **may not be applicable** if:

1. Delivery is done **after the sale is complete** and is **optional**.
2. **Freight is shown separately** in the invoice and **ownership passes at seller’s premises**.
3. The seller acts as an **agent to recover actual transport charges** paid to a third-party transporter (i.e., it's not part of the consideration for sale).

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### 📜 Legal Reference (for most Indian VAT laws pre-GST):

Under various State VAT Acts (e.g., Maharashtra VAT, Delhi VAT), **“sale price” includes charges for anything done by the seller in respect of the goods at the time of or before delivery**. This includes freight, packing, loading, etc., if charged to the buyer.

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### 🧾 Practical Example:

* **Invoice 1 – Freight included in product price**

* Item: Rs. 10,000
* Freight (bundled): Rs. 1,000
* **VAT applied on Rs. 11,000**

* **Invoice 2 – Freight shown separately after sale**

* Item: Rs. 10,000 (ownership transferred at seller’s gate)
* Freight: Rs. 1,000
* **VAT applied on Rs. 10,000 only** (if backed by transport bill)

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### ✅ Conclusion:

✔ **Yes**, VAT is applicable on delivery charges **if they are part of the sale consideration or included in the invoice**.

❌ **No**, if the delivery is post-sale, optional, and separately billed.

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If you let me know which state you're referring to or the context (pre-GST or international), I can give a more tailored response.

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