Vat on Freight

[Gopal B]

Dear Sir,

I am showing freight charges in Invoice. For calculation of Vat shall I include the freight charges or not as per AP VAT Rules ? .pls clarify

[SHIVKUMAR SHARMA]

Dear Mr.Rao

If You are showing Freight  amount in invoice ,You have to include the freight amount for calculation of VAT.

SHIVKUMAR SHARMA

[Mritunjay Kumar]

If you are showing freight clearly and seperatly in the invoice then vat will not be chargeable on the freight amount.

Regards,

Mritunjay.

[Guest]

Both the answers are contradicting, Please clear us.

[Arup Das]

3 Scenarios

When title and delivery of goods is transferred at the premises of manufacturer vendor---Cost of Freight would not be included in the value for calculating VAT.

If Vendor(you) is responsible for delivery of Goods at customer  premises(i.e title will get transferred in the customer premises), Freight should be included in the value for the purpose of VAT.

When title of goods is transferred at the premises of the manufacturer vendor, however, delivery of goods will be at customer premises:- Even if the cost of freight is seperately charged on the face of the invoice , the same shall not be included for the purpose of VAT.

[Rangarajan DV]

In my opinion -

When the price  is ex-works, the sale concludes at your factory gate and the transportation commences after taking delivery from you, in which case the buyer bears the freight / insurance risk.

In case, the price is door delivery, the sale concludes only at the gate of the buyer and the seller assumes risk of insurance and bears the freight cost.

In the former case, freight is a post-sale expense and not to be included for computing tax. in the latter case, it is pre-sale expense in which case freight need to be included for computing tax liability

[rishi mohan]

Vat is not applicable on the freight charges mentioned in the invoice.

AI Summary

VAT treatment of freight: include freight in taxable value when seller assumes delivery or title transfers at buyer premises. Freight charged on an invoice is included in the VAT taxable value when the seller is responsible for delivery or title transfers at the buyer's premises, making freight part of the pre-sale consideration; freight is excluded when the sale is ex works or title transfers at the seller's premises and freight is a post sale expense, even if separately shown.