## Components of Cost of Purchase
Applies to: Raw Materials and Finished Goods purchased from outside.
### Included in Cost of Purchase:
| Component | Notes |
|---|---|
| Purchase Price | Before trade discounts |
| Less: Trade discounts & rebates | Deducted from purchase price |
| Import duties | If non-refundable |
| Non-refundable taxes | e.g., GST where no ITC available |
| Freight / Transport charges | Yes — include |
| Handling costs | Yes — include |
| Insurance on purchases | Yes — include |
| Brokerage / Commission to buying agent | Yes — include |
### ⚠️ Key Rule: Refundable vs Non-Refundable Taxes
- GST with Input Tax Credit (ITC) → Tax is refundable → Deduct from cost (do NOT include)
- GST without ITC → Tax is non-refundable → Include in cost
> Test: "Will the business get this money back?" If yes → exclude from cost.