Clarity required on Freight and applicable GST on same

[Asked by Guest]

We are EPC contrcators and Purchase material from manufacturer. Then we sell the same to our customer.

For example, I had placed PO on Cables Manufacturer before GST was implemented. The PO components were as following:

1. Ex-Works Value

2. Excise Duty @12.5%

3. CST@1%

4. Freight Including any applicable tax

Now, after GST implementation, ED & CST have been abolished and shall be replaced by GST@18%. The question is that 18% shall be charged only on Ex-works value or Ex Works+Freight? If this 18% is to be charged only on Ex-works value, then how much GST rate is applicable on freight value. As far as my knowledge goes, I need to amend the PO for 18% on Ex-works value only. No need to amend the PO for freight component. Please advise and clarify.

Regards,

Vivek

[Rajagopalan Ranganathan]

Sir,

According to Section 15 (2) (c) of CGST Act, 2017 "The value of supply shall include incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services. Therefore if the freight is paid by the supplier then it will be includible in the transaction value and the supplier has to pay the tax on such transaction value ( Ex Work's value + Freight).

But if the freight is paid by you then you have to pay the tax treating the service as GTA service.

Thanks Sir.

Regards,

Vivek

[KASTURI SETHI]

Crystal clear reply from Sh.Ranganathan, Sir.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Sethi.

[Ganeshan Kalyani]

18% rate will be applicable on freight as it is charged on invoice. In such rate of material is applicable to freight.

AI Summary

GST on freight: include freight in taxable value when supplier charges it; otherwise treat freight as a transport service.
Section 15(2)(c) of the CGST Act requires inclusion in the transaction value of incidental expenses charged by the supplier, so freight charged or paid by the supplier must be included in the taxable value (Ex Works value plus freight) and taxed accordingly. If the recipient pays the carrier directly, freight is not includible in the supplier's transaction value and should be treated and taxed as a separate transport service (e.g., a GTA service).