Commission and freight role in GST

[RAM SHARMA]

Dear Experts,

We are manufacturer of exciasable goods and selling our goods through our various consignment agent in all over india against form F. We are providing 3% commission and freight to our consignment agent for selling our goods and availing service tax cenvat on such commission and freight up to the consignment agent warehouse. I would like to know your opinion in this regard after implementation of GST impact.

Thanks & Regard

[CSSANJAY MALHOTRA]

All forms i.e. C/D/E-1/F will be done away with in GST regime and the tax has to be paid in respect of supply to goods to own warehouse / sales through C&F agents. Input Tax credit is available and can be set off against the Tax payable by them against further supply of goods.

Commission and Freight are subject to CGST/SGST in respect of Intra-State transactions and IGST in case of Inter-State transactions. Input Tax credit is admissible subject to final product being taxable.

[Ganeshan Kalyani]

Sir, seamless credit is aimed in GST, therefore every stage is proposed to be taxable and allowing the flow of Cenvat credit at every stage. Thus, exemption on stock which we have in current tax regime will go away. Tax has to be paid and the receiving unit shall be eligible to take credit in the manner prescribed in the Model GST Law.

There is possibility that the Model GST Bill shall undergo change/modifications. All have to wait till time a final law is enacted.. Thanks.

[Ganeshan Kalyani]

Sir, IGST shall be payable by sending unit and the receiving unit shall be able to take credit by adjusting first against IGST payable followed by CGST and finally against SGST. The said sequence has been prescribed in the draft GST Law.Thanks

[Surender Gupta]

The transactions between the principal and agent will be treated as separate would be chargeable to GST as per the proposed scheme.

GST paid by the principal will be available to consignment agent / dealer as ITC and so no on subsequent sale.

Therefore, it is bound that, the business strategy are going to change. The manufacturer, after GST, will decide to store the goods in the warehouse or with the consignment agent of the different state taking into account the economic considerations with keeping in mind the liquidity since fund may get blocked due to payment of GST on such transfer.

Since, the business models are going to change, the manner in which commission are given to consignment agents may also change.

Indeed, if commission is paid separately, GST will be levied and the same will be available as ITC in the hands of manufacturer.

[Ganeshan Kalyani]

Sir, Sri CA Surender Ji, I fully agree with your views.

Sir, the intention of authority behind taxing the stock transfer is immediate liquidity to Exchequer. Say, if A has stock transfer to his branch in another State and the receiving location may sell those goods in the same month or by two or three months time depend upon the market demand. Generally looking into the need of that location stock transfer is taken place. But practically may take that much time in selling the goods in receiving branch state. Thus only when the goods are locally sold the Exchequer are getting the revenue. So there is a time gap from the date when goods are stock transfer and the date when actual sale is taken place. To bridge a gap and to prepone the tax collection Govt has come up which such provision where even stock transfer is taxes. This would make the authority to earn tax at the earlier time. Thanks.

AI Summary

GST Reform: Commission and Freight Now Taxable; Input Tax Credit Available. Stock Transfers Impact Business Liquidity Strategy. A manufacturer inquired about the impact of GST on commission and freight for goods sold through consignment agents across India. Responses highlighted that under GST, traditional forms like C/D/E-1/F will be abolished, and transactions will be taxable at every stage, allowing input tax credit (ITC) against tax payable. Commission and freight will be subject to CGST/SGST for intra-state and IGST for inter-state transactions. The business strategy may change due to GST payments on stock transfers, affecting liquidity. The tax on stock transfers aims to provide immediate liquidity to the government by preponing tax collection.