Excise Duty and Sales tax on Freight and Insurance

[vikas anand]

Dear All,

If the term of delivery is our ex-factory gate, but we are arranging Insurance and freight charges up to the buyer site. The same we are charging in the Invoice in below the line of Excise Duty & Sales tax amount and reimbursement made by the buyer. Please confirm Excise Duty and Sales tax will attract on Freight and Insurance.

Please be note that the charging of Insurance from buyer is more than we are paying for Insurance companies.

[Ganeshan Kalyani]

If the place of removal is factory gate then freight should not be added to Assessable value to pay excise duty but if it customer door step then the same should be added to assessable value to pay excise duty.

Sales tax is levied on sale price. Sale tax shall br charged on freight if it was agreed to a part of sale price. Thanks.

[KASTURI SETHI]

I concur with the views of Sh.Kalyani, Sir. In support most relevant case law is appended below:-

2015 (319) E.L.T. 221 (S.C.) = COMMR. OF CUS. & C. EX., AURANGABAD Versus ROOFIT INDUSTRIES LTD.

2015 (322) E.L.T. 394 (S.C.) = COMMISSIONER OF C. EX., MUMBAI-III Versus EMCO LTD.

[Mahir S]

Excise duty does not appear to be payable; however the excess amount earned through the insurance charges collected from buyer is liable to be shown as profit in the books of accounts.

[YAGAY and SUN]

We endorse the view of the experts.

[Ganeshan Kalyani]

The income shown on the credit side of the profit and loss account may be checked by the auditor for taxability of service tax.

AI Summary

Excise valuation: freight excluded from assessable value for factory-gate removals but included for door delivery, and sales tax depends on contract.
For excise duty, freight is excluded from assessable value when place of removal is factory gate but must be included where the seller delivers to the buyer's premises; insurance reimbursements are treated as reimbursement with any excess recorded as profit. Sales tax is levied on the sale price and applies to freight when it is agreed as part of the sale consideration. Auditors should verify potential service tax or other indirect tax implications of amounts charged for freight and insurance.