Transport of goods by a manufacturing Company

[SayadAziz Ahmad]

If we charge Transportation Charges for supply of products manufactured in our own company, should we charge GST on the value of Freight Charges. If so what rate should be used and what will be the HSN code for the Freight Charges.

[KASTURI SETHI]

Pl. elaborate the query. Who is supplier of service ? Who is receiver of service ? What is relationship between the two persons ? What is constitution of both (supplier and receiver) ?

[SayadAziz Ahmad]

1. Company manufacturing furniture.

2. Sends furniture to customers in company owned vehicle.

3. Charges freight in its invoice alongwith manufactured product.

4. Company is presently charging same rate of gst for freight as it charges for naufactured products HSN code.

Question is what GSN should be used for freight. Should it charge freight also under HSN 9403?

[KASTURI SETHI]

Practice adopted at serial no.4 above is correct. In this scenario, it takes the shape of composite supply. HSNs of both kinds of supplies should be mentioned separately on the invoices.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. It is a composite supply and GST rate of main material i.e. furniture in your case applies to freight charges as well. You are supplying furniture and not freight. Freight is only incidental to main supply. It takes a form of composite supply. You are correctly following the rule.

[SayadAziz Ahmad]

Thanks to Mr. Kasturi for his valuable inputs and thanks to all others who ratified his views.

AI Summary

Composite supply principle: freight charged by a manufacturer attracts the GST rate of the principal goods and is incidental.
When a manufacturer transports its manufactured goods and charges freight alongside the goods, the freight is part of a composite supply and the GST rate of the principal goods applies to the freight. Invoices should list HSNs for both the manufactured goods and the transport service separately, while applying the tax rate of the principal supply to the freight component.