GST for Freight (Composite)

Composite supply

Goods supplied, and Freight is billed 

What is the GSt Applicable?

Example :

Lets say you are selling 10,000 boxes at Rs. 10 each at total of Rs. 1,00,000 is the value of the shipment. There is a freight of Rs. 2000 so the total shipment is worth : Rs. 1,02,000.

Calculation of  GST: The Normal rate of freight might be charge at 5% as a separate activity and as per the SAC Code. And the goods like corrugated boxes as per the Excise Tariff / the GST Tariff , they have to be charging a GST of 12%

As per the composite supply rules of the GST , the freight does not have any separate significance. It will carry the same GST rates as per the Principal Commodity. So you will not be charging GST at 5% you will be charging GST at 12%

How to do this in Finsys :-

In Finsys, you will be creating two separate Item Codes, & Two Separate SAC Codes in the Masters

One would be called Freight General or Freight(G) and Second would be called Freight Composite or Freight(C).

So the Freight(C) would carry the GST rate of 12%. The Freight(G) would carry a standard rate lets say 5%. So when you will be booking a Sales Order or a Invoice in this particular case you will be taking a Freight(C) so that the tax on freight would come at a line item on the Invoice and it will cary the 12% tax as per the law. So this is the SOP .

Kindly do as per this SOP using Finsys ERP.

For a Example of this, See a Model invoice.

Question : Can you please explain the theory behind this ?

Composite Supply

Composite supply means a supply is comprising two or more goods/services, which are naturally bundled and supplied in with each other in the ordinary course of business, one of which is a principal supply. The items cannot be supplied separately.

Terms and Conditions for composite supply-

Any supply of goods or services will be treated as composite supply if it fulfils BOTH the following criteria:

  1. Supply of 2 or more goods or services together, AND
  2. It is a natural bundle, i.e., goods or services are usually provided together in normal course of business. They cannot be separated.


Question : Can you please explain how this is to be done in Finsys ?

Sure. Solution in Finsys is to create Item code in 59 Series, Link to Service Activity Code number, put the Rate of your Normally sold Item. And go ahead.