Freight, Transport charges are included in Assessable Value while Caluculation of Vat

[krishna besta]

Dear sir,

Please solved the issue below mentioend.

Sir, Some of the Vendors charged Freight charges, Transport charges on bills, In the bill show Basic Value of Goods, Freight and Transport charges. That freight and Tranport charges alos added Vat. 

In my knowledge Freight, Transport charges are reimbursment from the vendor. But not inclued in the assessable value while caluculationg the basic value for Vat.

Please resolve the above mentioned issue.

[YAGAY andSUN]

For resolving this matter we need to analysis the definition of Sale Price as mentioned in the APVAT Act:-

According to Section 2 (29) ‘Sale Price’ means :-

               (a)    the total amount set out in the tax invoice or  bill of sale; or

               (b)    the total amount of consideration for the sale or purchase of goods as may be determined by the assessing authority, if the tax invoice or bill of sale does not set out correctly the amount for which the goods are sold; or

               (c)    if there is no tax invoice or  bill of sale, the total amount charged as the consideration for the sale or purchase of goods by a VAT dealer or TOT dealer either directly or through another, on his own account or on account of others, whether such consideration be cash, deferred payment or any other thing of value and shall include:

                        (i) the value of any goods as determined by the assessing authority:

                            (a)    to have been used or supplied by the dealer in the course of execution of the works contract; or

                            (b)   to have been delivered by the dealer on hire purchase or any other system of payment by instalments; or

                            (c)    to have been supplied or distributed by a society including a Co-operative Society, Club, firm or association to its members, where the cost of such goods is not separately shown or indicated by the dealer and where the cost of such goods is separately shown or indicated by the dealer, the cost of such goods as shown or indicated;

                        (ii)  any other sum charged by the dealer for anything done in respect of goods sold at the time of, or before, the delivery of the goods;

                        (iii) any other sum charged by the dealer, whatever be the description, name or object thereof;

        Explanation-I – Subject to such conditions and restrictions, if any, as may be prescribed in this behalf, any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the sale price;

        Explanation-II – For the purpose of determination of sale price and levy of Value Added Tax, the Value Added Tax charged or chargeable shall not form part of Sale Price;

And if you go by the aforesaid definition then you would find that Section 2 (29) talks about the total amount set out in the invoice or as determined by the Assessing Authority.

It means the if the freight is shown in the invoice then it will become the part and parcle of the taxable amount on which VAT will be charged.

AI Summary

Sale price includes invoiced freight and transport charges, making them part of the assessable value for VAT. When freight or transport charges are itemised in a tax invoice, they form part of the sale price and are included in the assessable value for VAT; VAT charged is excluded from sale price, and cash discounts or refunds for returned goods are not included subject to prescribed conditions.