How to charge GST on expenses in the Invoice

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How to charge GST on expenses in the Invoice

There are following possible options for charging expenses like: Freight, Packing Charges, and Loading/Unloading Charges:

Options Appropriate
Option  1 Charge GST (at rate on services respectively) on the expenses paid in the invoice with value of goods. Most Appropriate
Option  2 Charge freight & other expenses paid in bill but do not charge GST in them. Lawfully wrong*
Option  3 A Charge freight & other expenses as reimbursement as Pure Agent and do not charge GST on them (2 Invoices) Not Appropriate

* Note: Any amount charged in invoice must be either charged to GST or exempt under any provision and must be mentioned on the invoice

 Option 1: Charge GST (at rate on services respectively) on the expenses paid in the invoice with value of goods:

S. No. HSN Code Particulars Value
1.2. XXXXXXXXXX Name of GoodsName of Goods 10000.0015000.00
CGST @ 2.5%      625.00SGST @ 2.5%      625.00 1250.00
1. XXXXX Freight 500.00
2. XXXXX Packing charges 50.00
3. XXXXX Loading Charges 100.00
CGST @ 9%       58.50SGST @ 9%       58.50 117.00
TOTAL 27017.00

Option 2: Charge freight & other expenses paid in bill but do not charge GST in them:

S. No. HSN Code Particulars Value
1.2. XXXXXXXXXX Name of GoodsName of Goods 10000.0015000.00
CGST @ 2.5%      625.00SGST @ 2.5%      625.00 1250.00
Freight 500.00
Packing charges 50.00
Loading Charges 100.00
TOTAL 26900.00

Option 3: Charge freight & other expenses as reimbursement as Pure Agent and do not charge GST on them (2 Invoices):

Tax Invoice:

S. No. HSN Code Particulars Value
1.2. XXXXXXXXXX Name of GoodsName of Goods 10000.0015000.00
CGST @ 2.5%      625.00SGST @ 2.5%      625.00 1250.00
TOTAL 26250.00

Bill of Supply: Reimbursement Charges as Pure Agent

S. No. Particulars Value
Freight  (Charges recovered as Pure Agent) 500.00
Packing Charges  (Charges recovered as Pure Agent) 50.00
Loading Charges  (Charges recovered as Pure Agent) 100.00
TOTAL 650.00

Input tax paid on such charges

REIMBURSEMENT OF EXPENSES/PURE AGENT.

Notification No. 13/2017 (Services under Reverse Charge Mechanism)

S. No. Category of Service Supplier of Service Recipient of Service
1 Supply of Services by a goods transport agency (GTA) in respect of transportation of goods by road Goods Transport Agency (GTA) (a)  any factory registered under or governed by the Factories Act, 1948(63 of 1948)(b)  any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or(c)  any co-operative society established by or under any law

(d)  any person registered under the Central GST Act or the Integrated GST Act or the State GST Act or the Union Territory GST Act

(e)  body corporate established, by or under any law

(f)   any partnership firm whether registered or not under any law including association of persons

(g)  Any casual taxable person.

 


Note:
The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

Rate of tax on services from GTA: 5% (without ITC)

Input Tax Credit under RCM

  • The service recipient can avail Input Tax credit on the Tax amount that is paid under reverse charge on goods and services.
  • The only condition is that the goods and services are used or will be used for business or furtherance of business.
  • Unfortunately, ITC cannot be used to pay output tax, which means that payment mode is only through cash under reverse charge.

Conclusion:

Consignor has to pay GST @ 5% on transportation charges of which he can take Input Tax Credit against the Output tax from supply of goods or services.

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Tax Invoice under Goods and Service Tax

Rajput Jain & Associates

Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.

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