Since one may treat shipping as part of your service, VAT/GST taxation may also cover shipping costs. The "Value Added Tax / Goods and Services Tax" add-on enables you to set VAT rates on the delivery options available to your customers and display this information at checkout.

The "VAT/GST" add-on enables you to assign special tax classes to the shipping methods used in the store, so VAT adds to the delivery cost. By default, all delivery costs are VAT-exclusive.

There are two default shipping tax classes that you can use to set VAT on delivery costs - "Zero VAT rate" and "Items Max VAT rate." The difference between these two tax classes is that the "Zero VAT rate" tax class does not add VAT to delivery costs, whereas the "Items Max VAT rate" class does. Therefore, the VAT rate added to the delivery costs by the "Items Max VAT rate" tax class equals the maximum VAT rate applied to the products in the shopping cart.

For example, there are two products in the cart:

  • Product 1 at the cost of £100 (VAT 20% included, i.e., price £83.33 + VAT £16,67);

  • Product 2 at the cost of £100 (VAT 5% included, i.e. price £95,24 + VAT £4,76).
    If the "Items Max VAT rate" tax class applies to the delivery method chosen by the buyer, the VAT rate of 20% will be added to the shipping costs and included in the total amount of VAT 20% displayed to the buyer.

To apply VAT/GST taxation to shipping, follow the steps below.


PREREQUISITES:

  1. Ensure you configured the VAT/GST add-on and set the appropriate VAT rates.

  2. Configure your delivery options via Store Setup > Shipping.

  3. Specify the tax classes applicable for them.


In the list of shipping methods, locate the Tax class column:

To change the tax class for a specific shipping option, click on the tax class name displayed opposite the name of the respective shipping method. You will see a dropdown allowing you to change the tax class. The options available for selection from the Tax class dropdown on the shipping settings page will vary depending on what tax classes you have configured in the store. You can choose any tax class with the configured VAT rate and apply it to shipping.

  • Zero VAT rate: Choose this tax class if you do not need to charge VAT on delivery costs.

  • Items Max VAT rate (default value): Choose this tax class if you need to charge VAT on delivery costs. The VAT rate added to the delivery costs will equal the maximum VAT rate set on the products added to the shopping cart.

  • Any other tax class from the list: Choose a tax class with a configured VAT rate if you need to charge VAT on delivery costs. The VAT rate added to the delivery costs will depend on the VAT rate set for the tax class you have chosen.

3. Click Save changes to activate the settings.

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