Freight charged/Services by way of transportation of Goods

[Shipra Garg]

Dear Sirs,

Kindly help me in identifying the purpose of Point 9 of GST service exemption list. The same has been reproduced below:

“9. Service by way of transportation of goods

(i.) by road except the services of –

(A) a goods transportation agency; or

(B) . . . . “

Section 15(C) of CGST Act:

“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;”

With due regards to Section 15 ibid, I am of the view that freight charged by a trader should be kept of GST levy for the reason mentioned in Service exemption list, else what is the purpose of giving such exemption.

Please put some light on it.

[RAMESH PRAJAPATI]

1) Notification No 12/2017-Central Tax dated 28.06.2017 exempts the Services by way of transportation of goods (i) by road except the services of- (A) a goods transportation agency; or (B) a courier agency; (ii) by inland waterways (HSN 9965) -- It is available to any registered person.

2) Section 15(2)(c) 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;

[RAMESH PRAJAPATI]

Section 15 states how to determine the value for taxable supply. There are inclusions and exclusions also.

[KASTURI SETHI]

The following kinds of services by way of transportation of goods by road are exempted:-. 1. Transportation of goods by way of a three wheeler scooter. 2. By a tractor 3. By a vehicle not covered under Motor Vehicle Act which falls under the Scope of GTA. Example can be traced out on any relevant site. Section 15 (C) talks of valuation of taxable service or goods. If any activity falls under the above mentioned exempted services, the valuation Section does not come into force.

[KASTURI SETHI]

I also support the views of Sh.Prajapati, an expert.

[Shipra Garg]

Sirs, I respect your view points. But I would like to put it this way.

When we buy cement from some vendor, we are billed with two elements:

Particulars	Rate	Qty	INR
Cement (Principal Supply)	₹ 100	10 Kgs	1,000
Freight			100
Total			1,100
CGST 14% (Rs. 1100 x 14%)			154
SGST 14% (Rs. 1100 x 14%)			154
Total			1,408

Now, coming back to my original query:

Shouldn’t freight be exempt from GST levy by virtue of N No. 12/2017-Central Tax dated 28.06.2017, which exempts the Services by way of transportation of goods (i) by road except the services of- (A) a goods transportation agency.

As per Section 2(30): Composite Supply is a supply of two or more taxable supplies. In above case there is one taxable supply and other is exempt by virtue of N No. 12/2017.

[Vamsi Krishna]

When you buy cement, freight is bundled together with the principal supply of cement supply and hence there is no question of exemption.

Here the transporter who renders transportation services to Cement supplier/seller ( not to the buyer) falls under exemption notification. The GST liability of transportation has to be discharged by Cement supplier under Reverse charge.

You being buyer has nothing to do with their exemption, rather have to discharge the GST liabilty on total purchase value which includes Freight (as bundled freight)

[KASTURI SETHI]

No exemption is available. It is a case of composite supply. Agree with Sh. Vamsi Krishna. Ji.

[KASTURI SETHI]

The element of "freight" cannot be dragged into Composite Vs Mixed Supply. Govt.' s intention is to levy GST on frieght except a few clear cut exemptions as explained in my reply yesterday and further exemption from GST on freight is available vide entry no.21 (b) (c) of Notification no.12/17- CT ( Rate) dated 28.6.17.

AI Summary

Composite supply treatment of freight means bundled freight is taxable as part of the sale of goods despite transport exemption. Notification No.12/2017 exempts services by way of transportation of goods by road except services of a goods transportation agency or courier; Section 15(2)(c) mandates inclusion of incidental expenses, including freight, in the value of a taxable supply. When freight is bundled with the sale of goods as part of a composite supply dominated by the goods, the freight is included in taxable value and attracts GST. If the transportation service itself is within the exempt category, valuation provisions do not convert that exempt service into a taxable one.