a) DHL will not be able to claim VAT rebate on GC’s invoice.

b) GC can claim rebate of VAT he paid at input stage (e.g. purchase of steel) only when he applies
15% VAT at output stage (i.e. while invoicing to DHL, applying VAT rate @ 15% instead of 7.5%).
c) Unless there is a price efficiency over additional VAT burden, 7.5% is cost effective for DHL.
However, price efficiency may turn out differently; example may be as follows-

Scenario – 1 Revised Remarks

price
Input cost 80 Sale price to 100 90
DHL
VAT rate @ 15% 12 VAT @ 15% 15 13.5
Total 92 Total 115 103.5 Cost to DHL
Additional VAT burden borne by GC nil Nil
Input cost to GC (as GC can claim full VAT 80 80
rebate)
GC’s Profit 20 10

Scenario – 2 Remarks
Input cost 80 Sale price to 100
DHL
VAT rate @ 15% 12 VAT @ 7.5% 7.5
Total Cost 92 Total 107.5 Cost to DHL
Additional VAT burden borne by GC 12
Input cost to GC (as GC cannot claim VAT 92
rebate)
GC’s Profit 8