Before We used charge Freight charges on Amount(Excluding Tax) and for IDT was calculated on Amount Excluding Freight Charges but now GST is Charged also on Freight Charges.
Suppose Freight Charges in 2%, and Net Amount of Invoice is INR 700780.00, Freight Would be INR 14015.6 but in GST Invoice Reverse Calculation is done and new rate of Freight is derived i.e. 2/118*100 = 1.6949%. So According to this Rate Freight Charges Will be INR 11877.6 ( 700780*1.6949%) and GST will be Calculated on Amount Including this Freight Charges.
My Question is Why this Exercise is Done?
Before since there was no tax on transportation (I have a different opinion), you could directly charge 2% on net amount.
Even if you charge 2% on gross amount or 1.6949% on net amount, you will get same amount.
Now GST is charged on transportation charges so this formula is used.
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