Vat on freight

Mahavat 41612 views 18 replies
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Director
26 Points Joined October 2013

Dear sir,

We are having a manufacturing unit of chemical in state of maharashtra. While selling our goods to a particular company, we have mentioned the freight charges after VAT.

For e.g the entries in Sales invoice is as given below :-

Basic Price : Rs. 10000

Excise @ 12.36% : Rs. 1236

VAT @ 5 % (On Rs.11236) : Rs. 562

Subtotal : 10000+1236+562 = 11798 Rs.----------------(a)

Transport Charges : Rs. 500 ----------------------(b)

Total Bill Amount : (a) + (b) = 11798+500 = Rs. 12298

Now kindly note that , we have not calculated MVAT on transport charges. The transport is provided by the another transporting agency also we are not giving the delivery of the material with our own vehicle.

Also another thing to note is that , in the Purchase order issued to us by the buyer, the same format i.e to mention transport charges after MVAT has been written. So were doing the same. But now while assessement , the Sales Tax department has raised a penalty for us.

So please guide / advice us in this matter.

thanks in advance,

regards, Siddharth Tiwari, From state of Maharashtra.

 

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On 26 October 2013 at 09:19 Report
Replies (18)
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STUDENT
65 Points Joined July 2008
Better you search for the list of applicable items for vat in your state vat department site as it changes from state to state. But any how the approach which you were following is followed every where. In my view too there is no vat included on freight charges
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On 26 October 2013 at 12:09
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Chartered Accountant
1489 Points Joined August 2011
Mr. siddharth Under MVAT : VAT on freight is applicable . Reason : Under MVAT act, 2002 all the expenses incurred for delivering the goods to the customer are liable for VAT except insurance , octroi . Accordingly the claim of the sales tax department is correct . If the invoice is already being raised excluding VAT on freight then it is advisable to raise a debit note on your customer for VAT on freight.. I hope the above solves your query .
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On 26 October 2013 at 12:36
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ACCT(Retd)
7197 Points Joined July 2010

   I agree with Mr Harshal. Transport charges are liable for VAT in almost all states....mjk

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On 26 October 2013 at 17:54
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Manager Direct Tax
135 Points Joined October 2009

Mr Siddharth,

Applicability of VAT on freight/transport charges is depends up on terms mentioned in the PO. If the term is ex-factory then VAT is not appliable on transport charges . If the term is "delivery at site " then VAT is applicable. Kindly verify your PO terms.

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On 28 October 2013 at 12:02
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Director
26 Points Joined October 2013

Dear Mr. Prashant (Manager Direct Tax)

Extremely thankful for your opinion. With reference to your reply , I want to clear that as per PO the format for rate calculations is as under :--

a) Basic Price of Material

b) Excise (Cenvatable)

c) MVAT

d) Freight

In this case , the basic price decided by the buyer is Ex-Factory Rate. Freight charges are extra which are payable by the buyer. The transportation is provided by the transportation agency. The transporting agency is billing to us.

In such case what stand should we take ? Kindly reply.

thanks.........

 

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On 28 October 2013 at 19:58
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Manager Direct Tax
135 Points Joined October 2009

Mr Siddharth,

It the term of delivery is ex-factory and all the risks and rewards are transferred to buyer at the fatcory gate then in that case sale is completed at factory gate and all the charges incurred thereafter will not form part of sales price.

It is still not clear in your case whether the risks and rewards are transferred to buyer at the factory gate. If the sale is exfactory then the reimbursent made by the buyer for transport can not be form part of sale price and vat is not applicable on the same.

To avoid vat liability you need to prove that the sale is completed at factory gate and transportation is arranged just to facilitate the buyer.

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On 29 October 2013 at 18:24
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Manager Accounts
22 Points Joined October 2008

Sir

AP VAT is appilicable in Transportion charges

 

Venkata Rao

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On 11 September 2014 at 11:23
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Accounts Manager - Taxation
1771 Points Joined April 2009

If Within state sale then VAT is applicable on Freight Charges, Out of State Sale is exempted.

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On 11 September 2014 at 16:33
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ACCT(Retd)
7197 Points Joined July 2010

Here the problem arises when freight is mentioned in the invoice.This happens when the seller is paying or arranging trasportation of goods to the buyer. If the buyer receives delivery of goods at the manufacturing point there will be no mention of freight in the invoice.So,whenever freight is charged in an invoice that amount has to be liable for VAT also.......mjk 

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On 11 September 2014 at 22:39
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Sales
100 Points Joined June 2010

It is better to book material under TO-PAY mode to avoid hassles of VAT and Service Tax. Note that sometimes you might have to pay service tax also under reverse charge...so be careful.

Government is not for your benefit or peoples benefit....it is only for its own and officers benefit. When you understand this theory, all your problems will be resolved easily.

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On 12 September 2014 at 02:17
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PRACTICTIONER
58 Points Joined February 2009

Yes MJK sir right ...even thogh terms and condition of buyer and seller are not discuss at the time of sale, seller must provide goods on his place ...in such case .the frieght are included in invoice and vat chargeble on that.

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On 30 October 2014 at 16:23
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Accounts Manager
22 Points Joined March 2015

I am I stone crusher manufacturing and i charged the vat on sale of stone, crush sand & other stone product but in this amount 30% amount is transportation charges and we charged the vat on this total amount and transportation charges are not mention separetely but if i mention the tranportation charges separetely & vat charged only on price of crsuh sand, stone, and we used our own vehicle for transporatation to deliver the goods. so plz suggest me vat charged on Transpoation charges or not,.. if vat not charged on freight charges then how can show this income & if i separetely shown transportation charges then our transportation  income is above 10 lakh and  this transportation income can comes under service tax or not.. basicly i wnat to save the vat on transportation charges bcz my customer is belongs rural are like Individual, farmers, not any company or firm..

So plz suggest me...

Thanks 

Govind Sonke

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On 26 June 2015 at 12:22
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Accounts Manager - Taxation
1771 Points Joined April 2009

Agree with AK, you have to reduce the freight from your sales invoice and send the material on to pay basis.

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On 26 June 2015 at 13:30
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Student CA IPC / IPCC
21 Points Joined October 2012

Hi all,

I have also doubt on this same issue,

We are puchased the goods (Cement powder) from Andrapradesh to Karnataka as Ex- factory billing at Rs 4200/- per MT. The cement company billed only on the material cost of Rs. 4200/- per MT. freight part is separate i.e., another transposrt company give a service for transportation and they raise a bill of Rs.1500/- per MT. so

1. Is the correct way of billing to us?

2. Is we have to raise a bill only on material cost or both material cost and frieght?

3. Is KVAT applicale only on cost or both?

Please advise on this.

Regards,

Praveen G C

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On 28 January 2016 at 20:06


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