Freight charges claimed by Supplier

[JOHN SHANNEL]

hi All, One of my supplier is claiming freight charges in his tax invoice. the Invoice contains multiple items with different GST rate. What is the GST applicable on the freight charges claimed by the supplier. Please advice.

[Raam Srinivasan Swaminathan Kalpathi]

Freight imputed as part of other supplies will be composite supply and therefore GST on freight can be collected on the proportionate value of the GST applied to each of the item taxable value.  The other option (to obviate litigation with the department) will be impute the highest GST tax rate amongst the supplied items taxable value.  Thanks

[Shilpi Jain]

Agree. If the customer is eligible for full credit and has no constraint in utilising such credit then highest GST rate can be charged on the freight charges.

[Ganeshan Kalyani]

I agree with the view of the experts. It is better to adopt the rate of goods attracting highest GST. 

[Yash Shah]

Section 8 of the CGST Act, 2017: Defines composite supply and provides that the GST on a composite supply is determined by the principal supply in the bundle of goods/services.

Section 15(2)(b) of the CGST Act: States that freight charges should be added to the taxable value of goods/services if they are included in the price or treated as part of the supply.

According to Section 8 of the CGST Act, when freight charges are imputed as part of other supplies, they will be considered as composite supply if the supply of goods and freight is bundled together. In such cases, the GST on freight charges will follow the same treatment as the main supply and can be calculated proportionately based on the taxable value of the goods or services being supplied.

The GST rate on freight will be determined based on the taxable value of each item, and the GST on the freight charge will be proportionately allocated across the different goods/services in the invoice.

[Padmanathan KV]

Agree with views of Kalpathi Ji. 

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir,

I agree with the views of Sri Yash Shah, Sir. 

AI Summary

Composite supply treatment of freight charges requires proportionate allocation or charging highest applicable GST rate. Freight imputed as part of bundled supplies is treated as a composite supply and follows the principal supply; GST on freight may be proportionately allocated across items by taxable value or, to avoid disputes and where input tax credit is available, charged at the highest GST rate applicable to any item. Section 15(2)(b) supports including freight in the taxable value when treated as part of the price, and Section 8 provides the composite supply framework.