GST on transportation/cartage/freight in addition to main supply

[Yogesh Khetrapal]

Mr. A, a registered dealer is transferring the goods through transportation, to Mr. C, whether Transporation would be include under the preview of supply under GST Act.?  

If it is a composite supply?

Whether it is necessary to have both the goods to be a supply a composite or mixed supply?

Pls. looking for an earliest response.

[Sadanand Bulbule]

Pla refer the following:

15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

(2) The value of supply shall include–––

(a) XXXX

(b) XXXX

(c) 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;

So charges inurred towards transportation at the time of  before/ delivery of goods is taxable.

[KASTURI SETHI]

 Supply of goods is not feasible without transportation. Hence it is a composite supply. Transportation charges shall be included in the transaction value.

[Shilpi Jain]

Pls have a look at the example given in the CGST Act itself 

(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.

[YAGAY andSUN]

Under the GST Act, the treatment of transportation as part of a supply depends on how the transportation is linked to the transfer of goods. If Mr. A, a registered dealer, is transferring goods to Mr. C and the transportation is involved in the transaction, transportation can indeed be treated as a supply under GST. However, whether it qualifies as a composite supply or a mixed supply will depend on how the transaction is structured.

In this case, if the transportation of goods is bundled with the supply of goods, and the transfer of goods cannot be completed without the transportation (i.e., transportation is an integral part of the transaction), it could be treated as a composite supply. If the goods are the principal supply, GST will be applied based on the rate of the goods, and transportation will be treated as an ancillary service.

For example, if Mr. A is selling goods to Mr. C and the delivery (transportation) is included in the deal, transportation would be seen as a part of the overall supply of goods. As the goods are the principal supply, the transportation service will be treated as an incidental service to the sale of the goods, and GST will be levied on the goods, with transportation included in the same tax rate.

In your scenario, if the transportation is not bundled with the goods and can be considered a separate supply (for instance, if Mr. A and Mr. C separately agree on the transportation service), then the transportation would be treated as part of a mixed supply. In such cases, GST would be levied on both the goods and the transportation separately. The highest GST rate applicable among the goods and the transportation service will apply.

Conclusion: In this case, if the transportation is part of a bundled deal and is considered necessary for the supply of goods, it will be treated as a composite supply, with the goods being the principal supply. If the transportation is offered separately, it would be treated as a mixed supply, where GST will be applied separately to the goods and the transportation, with the highest applicable rate being applied to the entire supply. This distinction helps determine how GST should be applied, depending on whether the transaction involves a natural bundle of goods and services or independent supplies provided together.

AI Summary

Composite supply treatment of transportation affects GST rate applied to bundled goods and freight transactions. The transaction value includes incidental expenses, including transportation charged by the supplier to the recipient at the time of or before delivery, making such transportation taxable. If transportation is naturally bundled with goods and integral to their transfer, the supply is a composite supply with goods as the principal supply and the goods' rate applying; if transportation is provided separately, it may constitute a mixed or separate supply with GST applied accordingly.