Shipping goods comes with freight charges, but how does GST affect them? This article explains how GST applies to freight, whether you can claim ITC, the HSN and SAC codes for freight, and what to expect with the Reverse Charge Mechanism (RCM) on freight charges, etc.What are Freight Charges?Freight charges refer to the expenses businesses incur to transport goods from one place to another. These charges vary based on several factors. The following is a breakdown of the common components of freight charges:ComponentDescriptionMode of TransportThe means used to move goods—road, rail, air, or sea. Each mode has distinct costs.Loading and UnloadingFees for handling the goods at both the origin and destination points.Forwarding CostsCovers safe delivery, packaging, and necessary documentation.How GST Applies to Freight ChargesScenarioGST ApplicabilityExplanationFreight charges included in the sale invoiceGST applies at the rate applicable to the goods soldIf freight is part of the total value of goods, it gets taxed at the same rate as the goods.Freight charges are billed separatelyGST applies as per the freight service rate.When billed separately, the applicable rate depends on the type of transport used.Freight charges paid to Goods Transport Agencies (GTA)GST applicable at 5% (without ITC) or 12% (with ITC) if the GTA opts to pay under forward charge, or 5% (without ITC) under the reverse charge mechanismIn most cases, the recipient (buyer) pays GST under RCM for GTA services. Check the list of  recipients covered under the Reverse Charge Mechanism.Freight charges for the export of goodsExempt from GSTFreight services for exports are generally GST-exempt.Reverse Charge Mechanism (RCM) on Freight ChargesThe Reverse Charge Mechanism (RCM) under GST shifts the tax liability from the supplier to the recipient, ensuring streamlined tax compliance for specific services in the transport and logistics sector. The CBIC notification no. 03/2022-Central Tax (Rate) dated 13th July 2022 clarified the GST rates applicable to Goods Transport Agencies (GTAs) on both a forward and reverse charge basis as follows:Service CategoryGST Rate (%)Special Conditions/NotesGoods Transport Agency (GTA) services - when the GTA does not opt to pay GST on a forward charge basis5%Input tax credit is not allowed on goods and services used in supplying the serviceGoods Transport Agency (GTA) services - when the GTA opts to pay GST on a forward charge basis5% or 12%If the 5% rate is selected, input tax credit is not allowed on goods and services used in supplying the service.(Note that the option to pay GST on a forward charge basis must be exercised by the GTA by filing a declaration.)One must note the following: Other than GTAs or courier agencies, road transportation is exempt from GST. GTAs exclusively providing RCM-liable services are not required to obtain GST registration.Ancillary services (e.g., loading, unloading, warehousing) are part of the composite GTA service if billed together and taxed under RCM.

Liquidated damages are typically levied in cases of breach of contract, failure to perform, non-delivery of supplies, etc. In this article, we will discuss the impact and rates of GST applicable on liquidated damages.What are liquidated damages?Liquidated damages refer to an amount stipulated in a contract, to estimate the actual damages incurred by one party for a specific breach by the other party. In simple words, liquidated damages are nothing but compensation for breaching a contract.Liquidated damages are usually ascertained where the loss is intangible. A clause in the contract will specify the amount of money that needs to be paid for failure to perform under the contract.For example, in case of a delay in the supply of raw materials by a seller, thereby leading to a loss of revenue by a manufacturer, the seller is obligated to pay 0.5% of the revenue lost for each week of delay, until the delivery has been made.Applicability of GST on liquidated damagesAs per the Central Goods and Services Tax (CGST) Act, Section 7(1)(d), the Scope of Supplydefinition includes activities referred to in Schedule II of the Act. Schedule II Para (5)(e) thereon specifies that “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act” comes under the definition of supply of services.Hence, it can be inferred that liquidated damages are taxable under GST, based on the premise that the aggrieved party has tolerated the non-performance of the other party under the contract.As GST applies to the supply of goods and services, liquidated damages will be taxable as a service under the GST Act.

Carbon credits play a vital role in environmental protection, and at the same time, it secures the financial health of the companies trading in it. In this article, we will discuss the applicability of GST on carbon credits.What is a carbon credit?The concept of carbon credits was introduced to reduce the outflow of greenhouse gases in the atmosphere. A carbon credit is a tradable permit or certificate, which allows a company to emit a predetermined amount of carbon dioxide or other greenhouse gas into the atmosphere.If a company exceeds the particular limit, it is penalised. At the same time, excess credits can be sold to other companies.Understanding carbon emission targets and carbon creditsCompanies need to purchase carbon credits to continue to emit greenhouse gases up to a specific limit. The respective government sets this limit, but typically one carbon credit allows one tonne of carbon dioxide or equivalent greenhouse gas.However, companies are allowed to sell their excess credits.

The applicability of RCM on renting vehicles has helped small service providers with improved liquidity by reducing their GST compliance. Paying GST on forward charge was not possible as they received payment for their services after several months.It was decided in the 37th GST Council Meeting to put the supply of renting of motor vehicles under RCM for suppliers charging GST at 5% to corporate bodies. But, RCM was not made applicable for suppliers paying GST at 12% with full ITC because this would have blocked the ITC chain. Hence, the government’s reverse charge mechanism helped in faster tax collections and reduced payments and compliance on small service providers.Definition and explanation of ‘Motor Vehicle’ and ‘Renting of Motor Vehicle’ under GSTThe word motor vehicle or renting of a motor vehicle is not defined under GST law. But as per Motor Vehicles Act, 1988, a motor vehicle means “any mechanically propelled vehicle used on roads but does not include a vehicle running on fixed rails or a special vehicle used in a factory or an enclosed premises having less than four wheels with engine capacity not exceeding 25 cubic centimetres.”Motor vehicle: Government vide Notification No.29/2019 dated 31.12.2019 replaced the word motor vehicle with “motor vehicle designed to carry passengers, and where the cost of fuel is included in the consideration charged from the service recipient”. Earlier, the term “motor vehicle” covered all types of motor vehicles.

Under GST, a single rate of 12% is applicable on under-construction properties, whereas no GST is applicable on completed properties. However, the tax rates have been reduced from 8% to 1% for affordable houses and 12% to 5% for other than affordable houses, subject to the builder not claiming input tax credit (ITC).In the case of a works contract service being provided to develop a plot of land, a GST rate of 18% is applicable. Stamp duty and registration charges continue to apply apart from the indirect taxes.Taxability of Sale of Land Under Pre-GST LawsBefore GST, VAT was applicable on the sale of goods and goods were defined as all kinds of movable property. Land, being an immovable property, was not subject to VAT. However, stamp duties were charged on the sale of immovable properties.Taxability of Sale of Land Under GST and ExemptionsAs per Schedule III of the CGST Act, the land sale is neither considered a sale of goods nor a supply of services.

Reimbursement of expenses takes place when a supplier incurs expenditure on behalf of the recipient of supplies. This article discusses the reimbursement of costs to a supplier and the impact of Goods and Services Tax (GST).What does reimbursement of expenses mean?Reimbursement of expenses refers to the repayment of money spent by a person. In business transactions, this usually happens when a supplier incurs expenditure on behalf of the recipient who is supposed to incur the said expenditure.There are two types of expenses that may get reimbursed to the supplier under GST:Incidental expenses incurred by the supplier in the course of supply. This could be in the form of commission, packing, travelling expenses, etc., and form a part of the supply value. These expenses are usually incurred before or at the time of delivery of the goods or supply of the services.Expenses that the supplier incurs as a pure agent.

The COVID-19 pandemic has changed the way the world does business. While almost every business function was impacted, the effects of which might last forever, the finance function has probably seen the most resounding changes. Even those businesses that ran completely offline today either have their accounting or tax compliance digitised or have begun to accept digital payments. But this was just the beginning.So, here are seven trends to watch out for in 2022 that will shape the future of finance.RegtechA term that has become popular in recent years, regtech, is technology to manage regulatory processes better. The main processes include regulatory monitoring, compliance, and reporting.

To run your business smoothly, you must learn how to manage your vendor data properly. Yet, many organisations struggle with incomplete information, outdated records, and miscommunication with suppliers. SAP’s Vendor Master tables provide a structured framework to store, manage, and track vendor information across different domains to address specific challenges you might face in building a reliable community of suppliers. What is the Vendor Master Table in SAP?The vendor master table is a central database used by a company to store and retrieve vendor-related information. This table simplifies how every team of a business, from procurements to accounts payable, interacts with vendors. As every member of your business is accessing unified information, this eliminates the risk of errors, such as incorrect payments or miscommunication with suppliers. When you manage several vendors without streamlined data, it becomes difficult to keep a tap on efficiency and meet compliance with regulations.

Supply chain visibility is a concept that can be game-changing for businesses and keeps them one step ahead of their competitors. It involves collecting real-time data and allowing businesses to track goods at every step of the supply chain. In this blog, we discuss what is supply chain visibility and how businesses can benefit by applying it. We will also explore the challenges companies face, the supply chain visibility metrics and ideas for improvement.What is Supply Chain Visibility?Supply chain visibility gives businesses the ability to track their products and components in real-time, throughout the supply chain, by collecting and sharing data. To put it simply, supply chain visibility aims to monitor the movement of goods across the entire supply chain from the supplier to the manufacturer to the consumer.When the companies have the right data about the supply chain at the right time, it ensures that:The management makes informed decisionsDisruptions are managed proactivelyOperations are optimisedThe process becomes time-efficientSupply chains have grown bigger and become complex over time. More and more countries are dependent on global suppliers who dominate world trade.

A modern CFO’s priorities have undergone a shift over time from ensuring accurate record-keeping, reporting, and regulatory compliances to now utilising financial data to build business strategy. Of course, that does not go to say that record-keeping and reporting are not important anymore. They are. But now, they are only a subset of the broader range of things that occupies a CFO’s mind space.So, what can we say are the top five things that a modern CFO prioritises:Creating monetary valueMitigating costs and building strategy to improve revenues and profits will always be one of the primary areas of a CFO’s focus. With businesses taking a hit due to the pandemic, it calls for adept professional thinking to find the initiatives that will create the highest value.