DETERMINATION OF AVERAGE (EQUALIZED) COST OF TRANSPORTATION

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....f finished goods. The Finance Act 2003 also specifies the certification requirement of transportation cost for claiming deduction while arriving at the assessable value of excisable goods cleared for home consumption/ export. There is a need to standardize the record keeping of expenses relating to transportation and computation of transportation cost. 2. Objective 2.1 To bring uniformity in the application of principles and methods used in the determination of averaged/equalized transportation cost. 2.2 To prescribe the system to be followed for maintenance of records for collection of cost of transportation, its allocation/apportionment to cost centres, locations or products. For example, transportation cost needs to be apportioned among excisable, exempted, non-excisable and other goods for arriving at the average of transportation cost of each class of goods. 2.3 To provide transparency in the determination of cost of transportation. 3. Scope 3.1 This standard should be applied for calculation of cost of transportation required under any statute or regulations or for any other purpose. For example, this standard can be used for : ....

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....g a specified period. 4.9 Equalized freight means average freight. 5. Maintenance of records for ascertaining Transportation Cost 5.1 Proper records shall be maintained for recording the actual cost of transportation showing each element of cost such as freight, cartage, transit insurance and others after adjustment for recovery of transportation cost. Abnormal costs relating to transportation, if any, are to be identified and recorded for exclusion of computation of average transportation cost. 5.2 In case of a manufacturer having his own transport fleet, proper records shall be maintained to determine the actual operating cost of vehicles showing details of various elements of cost, such as salaries and wages of driver, cleaners and others, cost of fuel, lubricant grease, amortized cost of tyres and battery, repairs and maintenance, depreciation of the vehicles, distance covered and trips made, goods hauled and transported to the depot. 5.3 In case of hired transport charges incurred for despatch of goods, complete details shall be recorded as to date of despatch, type of transport used, description of the goods, destination of buyer, name o....

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....lowing basis may be used, in order of priority, for apportionment of outward transportation cost depending upon the nature of products, unit of measurement followed and type of transport used : i) Weight ii) Volume of goods iii) Tonne-Km iv) Unit / Equivalent unit v) Value of goods vi) Percentage of usage of space Once a basis of apportionment is adopted, the same should be followed consistently. 6.4 For determining the transportation cost per unit, distance shall be factored in to arrive at weighted average cost. 6.5 Abnormal and non recurring cost shall not be a part of transportation cost. Explanation Penalty, detention charges, demurrage and cost related to abnormal break down will not be included in transportation cost. 7. Cost Sheet The cost sheets shall be prepared and presented in a form as per Appendices 1, 2 and 3 or as near thereto. Appendix 1 and Appendix 2 show the details of information to be maintained for compilation of transport cost for own fleet and hired transportation charges respectively. Appendix 1 is applicable where the organization is having its own fle....

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....n     Variable Cost   B1. Salaries & Wages of Drivers, Cleaners and others   B2. Fuel & Lubricants   B3. Consumables   B4. Amortized cost of Tyre, Tube & Battery   B5. Spares   B6. Repair & Maintenance   B7. Other Variable Cost (specify)   B8. Total Variable Cost (B1 to B7)     Fixed Cost   B9. Insurance   B10. Licence Fee, Permit Fee and Taxes   B11. Depreciation   B12. Other Fixed Costs (Specify)   B13. Total Fixed Cost (B9 to B12)   B14. Total Operating Cost (B8+B13)   C APPORTIONMENT (Basis to be specified) - usage   C1. Inward Transport Cost (B14 *A7/ A9)   C2. Outward Transport Cost (B14 *A8/A9)   C3. Transit insurance for inward movement   C4. Transit insurance for outward movement   C5. Total transportation cost for inward movement (C1+C3)   C6. Total transportation cost for outward movement (C2+C4)   Note : 1. Cost of Battery, and Ty....