Freight and delivery charges in GST invoices

The rule in one line

Section 15(2)(c) of the CGST Act includes in the value of supply incidental expenses such as commission and packing, and anything charged by the supplier to the recipient in respect of the supply at or before delivery. A seller who delivers goods and bills for freight is making one composite supply: the goods are the principal supply, and delivery goes with them. So freight takes the goods' rate.

Worked example: one rate

A Jaipur hardware wholesaler sells sanitaryware worth ₹50,000 (GST 18%) to a registered buyer in Jaipur, delivered in its own tempo, and charges ₹2,000 for delivery and ₹500 for packing.

Showing freight as a separate line is fine and often clearer, as long as it is inside the taxable value.

Goods at different rates on one invoice

If one invoice carries goods at 5% and 18%, the freight has to be taxed in a way that follows the goods. The common, defensible approach is to spread the freight across the lines in proportion to their value.

Example. Goods A ₹30,000 at 5%, goods B ₹70,000 at 18%, freight ₹1,000.

• Freight on A: ₹300, taxed at 5% = ₹15
• Freight on B: ₹700, taxed at 18% = ₹126

Some businesses tax the whole freight at the highest rate on the invoice. That over-collects but is safer than taxing it at the lowest rate. Decide one method and apply it consistently. This is general information, not tax advice.

When freight is not part of your sale

• Ex-works sales where the buyer hires the transporter: the freight is between the buyer and the transporter. If the transporter is a GTA, the GTA rules apply to them; see GST on goods transport.
• Pure agent reimbursements: Rule 33 allows certain costs incurred as a pure agent of the buyer to stay outside your value, but only under strict conditions (a contract making you the buyer's agent, the buyer being liable to pay the third party, and separate showing on the invoice). Ordinary freight on your own sale rarely meets them.
• Freight recovered later by debit note: if it relates to the supply, it is still part of the value; the debit note should carry GST.

Other charges that follow the same logic

Discounts work in the other direction; see GST on discounts and schemes.

Free delivery and the freight you pay

If you offer free delivery, there is no freight line: the cost is built into your price and GST is charged on that price. The freight you pay to get goods to customers is your business expense. Where you hire a GTA, you may owe GST under reverse charge on it and can usually claim that tax back as ITC; where you hire a truck owner directly without a consignment note, there is generally no GST. Either way, what you pay the transporter and what you charge the buyer are two separate things. Do not net them off on the invoice.

Common mistakes

• Adding freight below the tax line, so GST is charged only on the goods.
• Charging 18% on freight when the goods are at 5%, because 'freight is a service'.
• Leaving freight out of the e-way bill value.
• Booking freight income in a ledger with no GST setting, so it never reaches GSTR-1.

Setting it up in Tally and checking in Cashflow OS

In TallyPrime, a freight or packing ledger used in sales vouchers can be set to be included in the assessable value for GST and apportioned to the goods, so tax follows the item rates. Once it is set, Cashflow OS shows those invoices in the GSTR-1 view prepared from your Tally data, and the HSN-wise detail lets you check that freight has been absorbed into the item values rather than left untaxed. If writing back is switched on, sales vouchers created from the phone are validated by Tally.