Shipping charges sit in a confusing corner of GST. Sellers ask the same questions again and again: do I charge GST on the delivery fee I collect from customers? At what rate? Is it the same rate as the product? What about the GST on the freight my courier bills me? The answers hinge on a single idea — composite supply — and on who is providing what to whom. This is a plain-language overview, not a substitute for advice from your CA.
The core idea: shipping as part of a composite supply
When you sell a product and charge the customer for delivery of that product, GST generally treats it as a composite supply — the product is the principal supply and delivery is ancillary to it. In a composite supply, the whole thing is taxed at the rate of the principal supply. In plain terms: the GST rate on the shipping you charge the customer usually follows the GST rate of the product being shipped.
- Sell a 5% GST product and charge for its delivery? The delivery charge generally attracts the same 5% as part of the composite supply.
- Sell an 18% GST product? The bundled shipping charge generally follows at 18%.
- This is why you cannot simply slap a flat GST rate on 'shipping' independent of what is in the box.
The freight your courier bills you is a separate question
There are two different GST relationships to keep distinct. First, the shipping you charge your customer (covered above). Second, the freight your logistics provider or courier charges you. These are separate supplies with their own treatment, and conflating them is where a lot of confusion starts.
Transport of goods by road brings in the Goods Transport Agency (GTA) rules and, in certain cases, Reverse Charge Mechanism (RCM) — where the recipient of the service, not the provider, is liable to pay the GST. Whether RCM applies depends on the nature of the transporter and the option they have elected. Courier agency services and GTA services are treated differently. This is precisely the area to confirm with your accountant rather than assume.
Why this matters for your invoicing and ITC
- 1Charging the wrong GST rate on shipping to customers can create under- or over-collection that surfaces in reconciliation.
- 2Correctly capturing GST on inbound freight lets you claim eligible Input Tax Credit (ITC) instead of leaving it on the table.
- 3RCM liabilities, where applicable, must be self-accounted — missing them is a compliance risk, not just an accounting nicety.
- 4Clean, rate-correct invoices make your GSTR filings and reconciliations far less painful.
A practical checklist
- Map each product's GST rate and apply the same rate to bundled shipping charged to the customer.
- Keep courier tax invoices for the freight billed to you, order by order.
- Ask your CA whether GTA/RCM applies to your transport arrangements and document the answer.
- Reconcile GST collected on shipping against what you filed each period.
- Revisit the treatment whenever rates or rules change.
“The confusion was never the product GST — it was the shipping line on the invoice. Once we understood it follows the product as a composite supply, our invoicing got a lot cleaner.”— Illustrative composite of a seller's finance lead
Frequently asked
Generally yes. When you charge a customer for delivering a product, GST law usually treats it as a composite supply where delivery is ancillary to the product. The shipping charge is then taxed at the same GST rate as the product being shipped, rather than at a separate flat rate. Always confirm specifics with your CA, as this is general information and not tax advice.
For shipping bundled with a product sale, the delivery charge typically attracts the same GST rate as the principal supply — the product. So a 5% product carries 5% on its bundled shipping, and an 18% product carries 18%. The freight your courier separately bills you is a distinct supply with its own treatment, potentially involving GTA and RCM rules.
RouteOneX is not a tax tool and does not give tax advice, but it keeps every order's shipping charges and courier freight invoices organised in one place. That makes it far easier for your finance team or chartered accountant to apply the correct composite-supply rate, claim eligible input tax credit on inbound freight, and reconcile for GST filings.