Goods Transport Agencies (GTAs) play a crucial role in facilitating the movement of goods across various locations, ensuring the smooth functioning of supply chains. With the implementation of the Goods and Services Tax (GST) in India, there have been significant changes in the taxation of goods transport services. This article aims to provide a comprehensive overview of the GST applicability on Goods Transport Agencies, including the registration requirements, tax rates, and compliance obligations. By delving into the intricacies of GST on GTAs, businesses can better understand their tax liabilities and ensure seamless compliance with the GST regulations.
Transportation of Goods by Road
In terms of Notification no. (12/2017-Central Tax (Rate)) dated 28.06.2017 (sr.no.18), the following services are exempt from GST
Services by way of transportation of goods (Heading 9965):
(a) by road except the services of:
(i) a goods transportation agency;
(ii) a courier agency;
Thus, it is to be seen that mere transportation of goods by road, unless it is a service rendered by a goods transportation agency, is exempt from GST.
Who is a GTA – Goods Transport Agency?
Under GST laws, the definition of Goods Transport Agency is provided in clause (ze) of Notification no. (12/2017-Central Tax (Rate)) dated 28.06.2017.
(ze) “goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;
Thus, it can be seen that issuance of a consignment note is the sine-qua-non for a supplier of service to be considered as a Goods Transport Agency. If such a consignment note is not issued by the transporter, the service provider will not come within the ambit of goods transport agency. If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee.
It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. As a corollary, the services provided by such individual transporters who do not issue a consignment note will be covered by the entry at s.no.18 of notification no.12/2017-Central Tax (Rate), which is exempt from GST.
What is a consignment note?
Consignment Note is neither defined in the Act nor in the Notification no. 1136 F.T. (12/2017- Central Tax (Rate)) dated 28.06.2017. Guidance can be taken from the meaning ascribed to the term under the Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.
Charge of GST on services provided by GTA
Rate of tax on transportation services by GTA is intertwined with the mechanism in which tax will be charged. Firstly, the GTA shall exercise an option to pay tax either as forward charge or under reverse charge mechanism. Where the GTA opts to pay tax on forward charge mechanism, he shall have following options –
1. Tax @ 12% with ITC – In this option, the GTA shall charge 12% GST on its invoices and avail ITC on eligible inward supplies received by it.
2. Tax @ 5% without ITC – In this option, the GTA shall charge 5% GST on its invoices and shall not avail any ITC on its inward supplies.
The GTA who opts to pay tax on forward charge basis may exercise this option by making a declaration in Annexure V on or before 15th March of the preceding financial year, i.e for FY 2023-24, the GTA must have made the declaration by 15th March, 2024. For FY 2022-23, the said declaration can be made by 16th August, 2022.
Where GTA does not opt for forward charge taxation, in such cases tax shall be payable by the recipient on transportation services under reverse charge mechanism. The recipient shall pay tax @ 5% and avail input tax credit on such payment of tax. The transporter shall not be eligible to obtain any ITC on its inward supplies.
Summary of analysis:
Nature of transportation services
Services by non-GTA
Services by GTA opting to pay tax on forward charge basis
5% – without ITC
12% – with ITC
Option to be exercised every year through Declaration in Annexure V within 15th March of preceding year.
All invoices must contain the declaration.
Services by GTA opting not to pay tax on forward charge basis
The recipient of services shall pay tax and avail ITC of the tax paid.
Person Liable to Pay GST on GTA services
The liability to pay GST devolves on the recipients for supply of services by a goods transport agency (GTA)who has not paid central tax at the rate of 6%, in respect of transportation of goods by road (in terms of notification no. 1137 F.T. (13/2017-Central Tax (Rate)) dated 28.06.2017 (sr.no.1) as amended by notification no. 1499 F.T. (22/2017-Central Tax (Rate)) dated 22.08.2017, if the recipients (located in the taxable territory) belong to the following category:
(a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
(c) any co-operative society established by or under any law; or
(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons; or
(g) any casual taxable person.
Thus, in cases where services of GTA are availed by the above categories of persons in the taxable territory the GTA supplier has the option to pay tax (and avail ITC) @12% (6% CGST + 6% SGST); and if the GTA does not avail this option, the liability to pay GST will fall on the recipients. In all other cases where the recipients do not fall in the categories mentioned above, the liability will be on the supplier of GTA services.
GTA services specifically exempt
In terms of notification no. 1136 F.T. (12/2017-Central Tax (Rate)) dated 28.06.2017 (sr.no.21), the following services provided by a GTA (Heading 9965 or 9967) is exempt from payment of tax:
Services provided by a goods transport agency, by way of transport in a goods carriage of:
(a) agricultural produce;
(b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;
(c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred and fifty;
(d) milk, salt and food grain including flour, pulses and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or
(h) defence or military equipments.
Similarly, the following services received by the GTA (Heading 9966 or 9973) is also exempt in terms of notification no. 1136 F.T. (12/2017-Central Tax (Rate)) dated 28.06.2017 (sr.no.22)
Services by way of giving on hire:
(b) to a goods transport agency, a means of transportation of goods.
Thus, if the GTA hires a means of transportation of goods, no GST is payable on such transactions.
Significance of the term ‘in relation to’ in the definition of GTA
The use of the phrase ‘in relation to’ has extended the scope of the definition of GTA. It includes not only the actual transportation of goods, but any intermediate/ancillary service provided in relation to such transportation, like loading/unloading, packing/unpacking, trans-shipment, temporary warehousing, etc. If these services are not provided as independent activities but are the means for successful provision of GTA Service, then they are also covered under GTA.
Concession from issue of E-invoice-
A good transport agency doesn’t have to issue any voice even if their aggregate turnover exceeds the specified limit. Following declaration is required to be mentioned in the Tax Invoice, (Rule 46(s)-
“(s) a declaration as below, that invoice is not required to be issued in the manner specified under sub-rule (4) of rule 48, in all cases where an invoice is issued, other than in the manner so specified under the said sub-rule (4) of rule 48, by the taxpayer having aggregate turnover in any preceding financial year from 2017-18 onwards more than the aggregate turnover as notified under the said sub-rule (4) of rule 48-
“I/We hereby declare that though our aggregate turnover in any preceding financial year from 2017-18 onwards is more than the aggregate turnover notified under sub-rule (4) of rule 48, we are not required to prepare an invoice in terms of the provisions of the said sub-rule.”
The above discussion shows that not all transport of goods by road is by a GTA. To qualify as services of GTA, the GTA should be necessarily issuing a consignment note. Only services provided by a GTA are taxable under GST. Services of transportation of goods by a person other than GTA are exempt. Moreover, in cases where the service of GTA is availed by the specified categories of persons in the taxable territory, the recipients who avail such services are the ones liable to pay GST and not the supplier of services unless the GTA opts for collecting and paying taxes @ 12% (6% CGST + 6% SGST). In all other cases where GTA service is availed by persons other than those specified, the GTA service supplier is the person liable to pay GST. The GTA services supplier is not entitled to take ITC on input services availed by him if tax is being charged @ 5% (2.5% CGST + 2.5% SGST). In case the GTA service supplier hires any means of transport to provide his output service, no GST is payable on such inputs.
In a nutshell, the GST law continues the provisions prevailing under the Service Tax regime. The law recognises that pure transportation of goods services are mostly provided by persons in the unorganised sector and hence has specifically excluded such operators from the tax net. In respect of those who provide agency services in transport, the liability is cast on the recipients in most of the cases or unless option to pay under forward charge has been exercised by the GTA.
CA Pranay Jain is a young and aspiring Chartered Accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.
He is also socially active on LinkedIn at linkedin.com/in/capranayjain
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