Frieght charges on composite supply exempted goods

[Mohit Chhabra]

I sell wood charcoal (exempted) hsn 4402, if I add frieght charges in invoice , what will be tax on frieght, will it also be nill as frieght tax rate in case of composite supply is based on tax on goods supplied

 

 

[KALLESHAMURTHY MURTHY K.N.]

Sir, 

In my opinion, if the freight charges are separately charged in the bill, GST attracts for the supply of service.

[Shilpi Jain]

Whether a composite supply or not would not depend on how the price is charged.

If the transportation charges is for the product sold, then composite supply and no GST in this case.

There is an example given in the law which is similar and in that case also it is stated that the transportation charges will be treated as composite supply of goods.

[KASTURI SETHI]

The querist appears to be pro-active in this context. While entering into contract with the buyer, the terms and conditions of the agreement need to be drafted in such a way so as to include freight charges in the agreed upon price. Thus the transportation expenses/charges will be treated as composite supply as defined in Section 8 (a) of CGST Act, 2017.

Such agreement is legally valid contract as per Section 10 Indian Contract Act, 1872.

AI Summary

Composite supply: freight follows principal supply and may be exempt when linked to exempt goods.
Whether freight attracts GST depends on whether transportation forms part of a composite supply with the exempt goods or is a separate supply of service. If freight is separately charged, GST applies to the supply of service. If transportation is for the product and included in the agreed price or contract, it will be treated as a composite supply and taxed according to the principal supply, rendering freight exempt alongside exempt goods; parties should include freight in the contract price to ensure composite treatment.