How to add tax on shipping and packaging charges?
NEW: You can now add tax on your shipping charges in Sleek Bill.
When editing an invoice, after you have added your item(s), you can add a shipping charge and the appropriate tax rate. See the example below
Shipping charges along with freight charges or any other incidental charges have to be shown on your invoice and under GST it is mandatory apply tax on them.
Charges under GST
The law clearly states that such incidental charges have to be added to the value of the product or service, for tax calculation purposes. The list of incidental charges: Shipping
Loading and unloading charges
These incidental charges have to be taxed on a proportional basis, on each item in your invoice. As it might be confusing to choose which basis (quantity, value, weight/volume) to add the proportionate tax to, quantity has been chosen as per general agreement.
Let's take an example of this would work.
Let's say you have sold 10 boxes of item X and 20 boxes of item Y
Item X=10 boxes ... 200 INR/box ... GST @12%
Item Y=30 boxes ... 400 INR/box ... GST @5%
Total Shipping ... 500 INR
We take quantity as the basis for adding shipping charges. Which results in the following tax calculation:
Item A 10 200*10=2000 2000*12%=240
Shipping A - 500*10/40=125 125*12%=15
Item B 30 400*30=12000 12000*5%=60
Shipping B - 500*30/40=375 600*5%=30
Until the government gives notice of the basis for adding incidental charges, you can choose any basis in Sleek Bill.
Please consult your CA before choosing how to apply tax on incidental charges.
So how to add tax to these charges?
To add any incidental charges such as shipping and packaging or freight, add each one individually to your Item List and select the item type as "goods" and leave the HSN/SAC field empty.
There are 2 methods of doing this:
If you have one or more products with the same tax rate (each one has a tax rate of 12%) and you want to add shipping or freight charges, you can create individual items in your item list.
For example, you can create items like:
Shipping Charges @5%, Packaging Charges @5%
And add them to the invoice level.
If you have multiple products in the invoice with different tax rates and you want to charge shipping or other charges at the item level, create taxes as per the tax rates of the respective items : Shipping Charges @12%, Shipping Charges @5% and add them at the item level.