GST on GTA services

Introduction:

Transport industry is seen as one of the most important industry in any economy as no other industry or service sector could survive or function in absence of transportation. Transport sector can be classified into various segments including transport through aircrafts or vessels, transport by rail and most importantly transport of goods by road. “Goods Transport Agency” (GTA) was also covered under the tax ambit during the service tax regime and it continues to have the same legal position under GST regime as well. However, GTA services have always been a matter of debate from taxation point of view. In this article, an attempt has been made to discuss and answer all the contentious issues relating to GTA services.

Who is ‘Goods Transport Agency’ (GTA)

In the service tax regime, Section 65B (26) of the Finance Act, 1994 defined “Goods Transport Agency” as any person who:

• Provides service in relation to transport of goods by road AND
• Issues consignment note, by whatever name called.

Therefore, besides rendering goods transport services by road, the issuance of consignment note was one of the most important criteria for being “Goods Transport Agency”. The definition of GTA (under clause (ze) of Notification No. 12/2017) remains unchanged in the GST regime as well.  Thus, issuance of consignment note will be essential criteria to bring goods transport by road under the ambit of GST.

What is a ‘Consignment Note’

The definition of ‘Consignment Note’ is not given under the GST laws. As per Rule 4B of Service Tax Rules, 1994, “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 following:
  (a) Name of the consignor and consignee
  (b) Registration number of goods carriages in which the goods are transported
  (c) Details of goods transported
  (e) Place of origin and destination
  (f) Person liable to pay tax whether consignor, consignee or GTA

What is Courier Agency

‘Courier Agency’ means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilizing the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles. We will discuss the GST implications on courier agencies later.

What are the rates of GST in case of GTA services

• For understanding the GST rates in respect of GTA services, we will refer Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 20/2017- Central Tax (Rate) dated 22.08.2017.
• Sr. No. 9 and Sr. No. 11 of the aforesaid notification provides the appropriate classification headings and GST rates for GTA as below:

Note:

• It should be noted that the GTA has to choose option to pay tax @ 5% without ITC or 12% with ITC for the entire year and option once taken cannot be changed.
• Support services in relation to GTA under Heading 9967 may include:
  (a) Loading/ unloading
  (b) Packing/ unpacking
  (c) Transhipment
  (d) Temporary Warehousing
  If these services are provided separately by the GTA, these will be charged to GST separately @ 18%.

Is GST payable on GTA services under Reverse Charge Mechanism (RCM)

• Liability under Forward Charge: If the GTA has opted to pay tax @ 12% with ITC, then the GTA shall be liable to pay GST on services provided by it under forward charge.
• Liability under RCM: If the GTA has not opted to pay tax @ 12% and the recipient of GTA service belongs to any of the following category, the liability to pay GST shall be upon the recipient of the GTA services under Reverse Charge Mechanism @ 5%:

Note: If the recipient does not fall under any of the categories mentioned above, the liability will be on the supplier of GTA services. In this case, GTA shall pay GST @ 5% without ITC benefit.

Who is liable to pay GST under RCM

• Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017 notifies the category of services where GST is to be paid under RCM by the recipient of services. Therefore, the recipient of GTA services shall be liable to pay GST under reverse charge.
• The above notification states that “The person who pays or liable to pay freight for the transportation of goods by road in goods carriage to GTA, located in taxable territory shall be treated as receiver of service”.

Whether ITC available for GST paid under RCM basis

Yes, the recipient of GTA services who makes payment of GST under RCM as well as under Forward Charge basis is eligible to take input tax credit of GST paid on GTA services if such services are utilised by him in the course or furtherance of business.

Is GST payable where GTA services are provided to an unregistered person

If GTA services under (Heading 9965 or 9967) are provided by a Goods Transport Agency to an unregistered person other the categories specified above, then such GTA services shall be exempted from tax as per Notification No. 12/2017- Central Tax (Rate) as amended- Refer Entry No. 21A of the notification.

What are the exemptions from GST in case of GTA services

According to Sr. No. 21 of  Notification No. 12/2017- Central Tax (Rate) as amended, GST shall be exempted in case of GTA services (Heading 9965 or 9967) by way of transport in a goods carriage of:

• Agricultural produce
• If goods are carried in the goods carriage and total freight charged by the GTA from single or multiple recipients of service in respect of goods carried in that carriage is not more than Rs. 1500.
• Where goods are carried in the goods carriage and the freight charged from a single consignee does not exceed Rs. 750.
• Milk, salt and food grain including flour, pulses and rice
• Organic Manure
• Newspaper or magazines registered with the Registrar of Newspapers
• Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap
• Defence or Military equipment

Is GST chargeable on GTA services provided to Government departments

• Entry No. 21B of Notification No. 12/2017- Central Tax (Rate) as amended specifically provides exemption from GST in case of GTA services covered under heading 9965 or 9967 provided to Government departments.
• The exemption shall be available from GST where services are provided by a GTA by way of transport of goods by road in a goods carriage to-
  (a) A Department or Establishment of Central Government or State Government or Union Territory or
  (b) A local authority or
  (c) Government Agencies
  which has taken registration under CGST Act only for the purpose of tax deduction under section 51 and not for making taxable supply of goods or services.

Whether GTA is liable to register under GST

• Refer Notification No. 5/2017- Central tax dated 19-06-2017 for this purpose. This notification clearly states that the persons who are engaged only in making supplies of taxable goods or services where tax is payable under reverse charge, such persons shall be exempt from obtaining GST registration.
• Therefore, A GTA is not required to get registered under GST if he is exclusively engaged in GTA services where the tax is paid by the recipient under reverse charge basis even if the turnover of GTA exceeds threshold limit of Rs. 20 Lakhs.

Is GST applicable on hiring of vehicles by a GTA

• If a GTA takes on hire any means of transportation of goods, no GST is payable on the hiring services.
• This exemption is allowed by Sr. No. 22 of  Notification No. 12/2017- Central Tax (Rate) as amended.

How to determine Place of Supply in case of GTA services

Place of Supply is one of the most important factors which helps in deciding whether the transaction shall be taken as “inter-state supply” or “intra-state supply”. In accordance with IGST Act, the place of supply of services by way of transportation of goods, including by mail or courier to-

(a) A registered person shall be: - Location of such registered person
(b) A person other than registered person shall be: Location at which such goods are handed over for their transportation i.e. business place of transporter where goods are handed over for transportation.

We will try to understand the “Place of Supply” using some examples:

Mr. Ram (Delhi) sources goods from Mr. Shyam (Mumbai) and avails GTA services from X Transport registered in Haryana. Suppose, both Mr. Ram and Mr. Shyam are registered under GST. In this case, Place of Supply will be “Delhi” as Mr. Ram is a registered person in Delhi.

But if Mr. Ram is an unregistered person, place of supply will be the place where goods are handed over to transporter for transportation i.e. Mumbai. In this case, the location of recipient is not relevant for determination of place of supply.

What are the accounts and records to be maintained by GTA

• According to Section 35(2), every transporter, irrespective of whether he is a registered person or not, shall maintain records of the consignor, consignee and other relevant details of the goods in such manner as may be prescribed.
• If a transporter is not registered, then, he shall submit the details regarding his business electronically on the common portal in FORM GST ENR-01 and upon validation of the details furnished, a unique enrolment number shall be generated and communicated to the said person.
• Any person engaged in the business of transporting goods shall maintain records of goods transported, delivered and goods stored in transit by him along with the GSTIN of the registered consignor and consignee for each of his branches.

What are the details to be shown in the invoice raised by a GTA

GST compliant invoice of a GTA must have the following details:

• Name of the consignor and consignee
• Registration number of vehicle carrying the goods
• Description of goods transported along with their gross weight
• Details of place of origin and destination
• GSTIN of the person liable for paying tax whether as consignor, consignee or GTA
• Name, address and GSTIN (if applicable) of the GTA
• Tax invoice number generated serially for that financial year
• Date of issue of invoice
• Description of service
• Taxable value of supply
• Applicable rate of GST (showing CGST, SGST, IGST, UTGST as applicable)
• Amount of tax
• Whether GST is payable in reverse charge basis
• Signature of supplier

Conclusion:

For GTA services, issuance of consignment note is necessary to qualify as GTA service. If consignment note is not issued, then the transport by road services is not liable for GST. Further, in case of GTA services, the recipient of services shall be liable to pay tax under reverse charge in case of specified categories of recipient of services. Further, if the GTA opts to pay tax @ 12% under forward charge, such GTA shall be liable to pay tax. The recipient of GTA services shall be eligible to take ITC of GST paid whether 5% or 12% by him.

Furthermore, there is one important point to note that if GTA service providers hire any means of transport to provide GTA services, no GST is payable on such inputs. For example, X transport co. hires 2 trucks from Mr. Shyam on rent, in this case neither Mr. Shyam nor X transport co. is obliged to pay GST on hire charges of the truck.