Freight charges part of sale price — Madras HC

The Madras High Court examined whether freight charged separately by a seller forms part of the “sale price” for levy under the Tamil Nadu General Sales Tax Act where the seller retains responsibility and control up to delivery at the buyer’s premises. The Court held that when contractual terms or commercial practice show that the seller retains responsibility for carriage, transport, or delivery — and thereby the freight is part and parcel of the transaction of sale rather than an independent service — such freight must be included in the sale price and is taxable under the TNGST Act. The judgment analyses the substance over form: commercial realities and the parties’ allocation of risk determine tax incidence. The ruling clarifies evidentiary approach (contract terms, invoices, delivery terms) for authorities and assesses interplay between sale consideration and ancillary charges. Practically, the decision signals caution to sellers who “separately” invoice freight while retaining delivery obligations: tax authorities may treat such charges as part of taxable value, affecting valuation, compliance and past assessments. Businesses should review invoicing, contract clauses, and risk allocation to align commercial practice with tax treatment and reduce exposure to reassessments and penalties.