GST on Freight Charges

[Suresh P]

Dear Experts,

Please verify the correctness of contents of the below table in case of freight charges reimbursement by the Company to C&F. Please note in the 3rd case, paying GST out of the fixed amount received from the Company will be a loss to the C&F and the Company does not insists to raise an Invoice and If GST is included in invoice , Co may take ITC and in effect the actual cost of transportation will be higher than the rate at which it is reimbursed.

Sl No	Contract Nature	Explanation
1	Contract between Company and C&F is FOR. But C&F incur TP Charges but later reimbursed by Company at a Fixed Rate. C&F hires a GTO for the delivery.	Responsibility to deliver to the place of destination is upon the Company. Under Rule 33, C&F can Act as Pure Agent and raises invoices against the Company for the reimbursement of actual TP Charges without GST. If the Company pay at a fixed rate over and above the Actual TP charges, the excess is leviable to GST. The C&F may pay GST under RCM on the TP charges paid by it to GTO.
2	Contract between Company and C&F is Ex-WH & C&F incur TP charges own its own by hiring a GTO.	Responsibility of Inward Transportation is upon the C&F. No Reimbursement of expenses takes place. The C&F may pay GST under RCM on the TP charges paid by it to GTO.
3	Contract between Company and C&F is FOR. C&F uses its own vehicle for the inward transportation and the Company reimburse the same at a fixed rate.	Responsibility of inward transportation is upon Company. The concept of Pure Agent cannot be applied as no third-party GTO is involved. C&F Agent must raise a GST Invoice against the Company for the actual transportation cost received from the Company.
4	Contract between Company and C&F is Ex-WH & C&F uses its own vehicle for the Transportation.	Responsibility of Inward Transportation is upon the C&F. No Reimbursement of expenses takes place. No RCM as no GTO/GTA is involved.

 

AI Summary

Exploring GST Implications on Freight Charge Reimbursements: RCM, Pure Agent Role, and GST Invoicing in C&F Contracts. A discussion on the Goods and Services Tax (GST) implications of freight charge reimbursements between a company and a Clearing and Forwarding (C&F) agent. The scenarios cover contracts where the company or C&F is responsible for transportation, either using third-party services or their own vehicles. Key points include the applicability of GST under Reverse Charge Mechanism (RCM), the role of C&F as a Pure Agent, and the necessity for GST invoices. Experts advise that the party bearing the freight costs pays GST and recommend seeking professional advice to optimize tax strategies.