How to Charge GST in case of FOR basis contracts

By | May 27, 2018
(Last Updated On: May 27, 2018)

How to Charge GST in case of FOR basis contracts

Video Tutorial by CA Satbir Singh explaining how to Charge GST in case of FOR basis contracts

Meaning of F.O.R basis freight

FOR means Freight on Road.

If the freight is paid by the consignor (Supplier) and the goods remain consignor’s (Supplier) property until their delivery is taken by the consignee (recipient)  upon their arrival at the destination,

It means the price charged by supplier includes the cost of transportation.

Sometimes, it is also called Free on Road (Rail, Board or Ship).

How to charge GST on outward freight charged in tax invoice in case of F.O.R basis contracts

In case of FOR basis contracts, the supplier arranges transport.

  • He may pays GST under reverse charge on outward freight.
  • He then charges outward freight in the tax invoice.

In such case, the outward freight charged is part of value of goods and GST is payable on value including outward freight. The rate is same as applicable to goods, as this is a composite supply as per section 2(30) of CGST Act.

It is not correct to charge freight separately and charge GST @ 5% [2.5% plus 2.5%] as the service of supplier of goods is not Goods Transport Agency Service at all.

Section 2(30) of CGST Act. composite supply

“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;

Section 8 of CGST Act 2017 Tax liability on composite and mixed supplies .

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:—

(a)a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and
(b)a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

 

GST on GTA : Free Study Material : Goods Transport Agency

GST Composite Supply and Mixed Supply : Free Study Material

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