ITC on shipping charges and GST Charge on outward supply

I have a query related to shipping Charge and GST collection of it.

lets us understand this with and Example.

Mr. A an online T-shirt Seller who sells products through his website and Mr. B who does white labelling for Mr. A and Ships products Directly to the Customers of Mr. A

Mr. B who is a vendor of Mr. A Charges Shipping to Mr. A and Collects GST on it.

For Example

Product cost- ₹ 305/-
GST @ 5 % - ₹ 15.25/-
Shipping Cost - ₹ 50.85/-
GST @ 18% - ₹ 9.15
Total Invoice Amount- ₹ 355.85 + GST - ₹ 24.4/-

Is Mr. A eligible to get ITC on Shipping Charge too?

Again my another question is that how should Mr. A make a GST invoice. Mr. A does not Charge Shipping Charge Separately to the Customers he simply charge ₹ 549/- for the product. should me make invoice like this

Method 1:
Products Amount - ₹ 522.85/-
GST @ 5 % - 26.15/-
Total Invoice Amount = ₹ 549/-

or

Method 2:
Products Amount- ₹ 465.70/-
GST @ 5 % - ₹ 23.3/-
Shipping Charge - ₹ 50.85/-
GST @ 18 % - ₹ 9.15
Total Invoice Amount- ₹ 549/-

Please help me on this.

Hi Aaquib,

Great questions — you're dealing with two important areas of GST treatment: Input Tax Credit (ITC) on inward shipping and correct invoice structuring on outward supplies. Let's tackle both:

✅ 1. ITC on Shipping Charges Paid to Vendor (Mr. B)

🔍 Situation:

Mr. B charges shipping of ₹50.85 + GST @ 18% (₹9.15) to Mr. A.
The shipping service is used in the course of business (i.e., fulfilling Mr. A’s customer orders).

✅ Answer:

Yes, Mr. A is eligible to claim ITC on the GST (₹9.15) charged on shipping by Mr. B, provided:

The shipping service is used in the course or furtherance of business ✅
Mr. B’s invoice has Mr. A’s GSTIN mentioned ✅
Mr. B has uploaded the invoice in GSTR-1, and it reflects in Mr. A’s GSTR-2B ✅
Mr. A pays for the service and possesses a valid tax invoice ✅

Conclusion: You can claim ITC on the ₹9.15 charged by Mr. B under shipping.

✅ 2. How Mr. A Should Raise GST Invoice to His Customers

📦 Situation:

Mr. A charges ₹549 (all inclusive) to the customer.
He does not show shipping separately to the customer.
The product is taxed at 5%, and shipping cost is not shown separately.

📌 Key GST Rule on Shipping Charges:

If shipping is not charged separately and is part of the value of the goods, then shipping follows the tax rate of the goods (per Section 15 of CGST Act and relevant circulars).
Therefore, no need to apply a separate 18% GST on shipping, because it's bundled with the main supply (T-shirt @ 5%).

✅ Correct Invoice Format:

✅ Use Method 1 (Bundled approach):

Here, the shipping is considered as part of the composite supply of goods.
You apply 5% GST on the total value, and that’s acceptable as per GST laws.

🔹 No need to break out shipping separately if not shown to customer
🔹 Don’t use Method 2, because it implies mixed supply and may incorrectly apply 18% GST on shipping

🔁 To Summarize:

Query	Answer
Can Mr. A claim ITC on GST charged on shipping by Mr. B?	✅ Yes, if used for business and conditions met
How should Mr. A invoice the customer (₹549 all-inclusive)?	✅ Use Method 1, charge GST @ 5% on total