Analysis of GST amendments in services of GTA w.e.f 18th July 2022

Ishan | Last updated: 20 July 2022

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Quick Summary

From 18th July 2022, Goods Transport Agencies (GTAs) will see changes in GST regulations. Exemptions on certain transportation services have been removed, meaning GST will now apply to most road transportation of goods. GTAs also have a new option to pay GST themselves under the Forward Charge Mechanism at rates of 2.5% or 6%, depending on whether they claim Input Tax Credit (ITC). Alternatively, they can continue under the Reverse Charge Mechanism where the recipient pays GST.

(A) Removal of certain Exemptions related to services of transportation of goods by a Goods Transport Agency (GTA)

Notification No. 04/2022- Central Tax (Rate) dated 13.7.2022 amends service exemption Notification 12/2017- Central Tax (Rate) dated 28.6.2017 and removes exemption as provided against Serial No. 21, in column (3), Clauses (b) and (c). The abovementioned Entry is reproduced hereunder:

Source: Extract of Notification 12/2017- Central Tax (Rate) dated 28.6.2017

GST Changes for GTA Services from 18th July 2022

Interpretation and analysis

Now, with effect from 18.7.2022, exemption has been withdrawn on the abovementioned highlighted entries, namely, on transportation of goods on road by a Goods Transport Agency (GTA) where, (1) the consideration charged on transportation of goods in a single carriage of GTA does not exceed Rs. 1500, and (2) the consideration charged for transportation of all goods for a single consignee does not exceed Rs. 750. Therefore, from now on, services of transportation of goods by a GTA on road of any amount shall attract GST apart from the specified cases of exemptions as provided in Entry 21, clause nos. (a), (d), (e), (f), (g), (h).

(B) Amendments in Tax rates on transportation services by GTA and option available for GTA to exercise payment of output tax under Forward Charge Mechanism or Reverse Charge Mechanism for every Financial Year

Notification No. 03/2022- Central tax (Rate) dated 13.7.2022 has made amendments to Notification No. 11/2017- Central Tax (Rate) dated 28.6.2017. The amendments in relation to tax rates applicable on services of transportation of goods by a Goods Transport Agency by road have been discussed hereunder:

Kindly find the relevant extract of the amendments in relation to Goods Transport Agency as per Notification 03/2022- Central Tax (Rate) dated 13.7.2022 as hereunder:

Source: Extract from Notification No. 03/2022- Central tax (Rate) dated 13.7.2022

Interpretation and analysis

(1) GTA has option to itself pay GST or not (RCM): With effect from 18.7.2022, Goods Transport Agency (GTA) shall be provided with options to pay GST under Forward Charge Mechanism (FCM) with the option that the GTA, (1) (a) may itself pay output tax on transportation services @ 2.5% each under CGST Act and SGST Act with the condition that it does not claim Input Tax Credit (ITC) on the goods and services used in supplying the transport service, or has the option that the GTA, (1)(b) may itself pay output tax on transportation services @ 6% each under CGST Act and SGST Act and may claim ITC on the goods and services used in supplying the transport service.

(2) The GTA may exercise payment of GST on transport services under Forward Charge Mechanism (FCM) i.e. pay the output tax itself, by making a declaration in Annexure-V on or before 15^th March of the preceding year. Annexure-V shall be made available on the GST Portal soon. For example: For exercising the option to pay output tax under FCM for F.Y. 2023-24, the GTA has to submit the declaration in Annexure-V stating the same latest by 3.2023.

(3) However, a GTA has the option to select FCM method of payment of output tax for Y. 2022-23 by submitting Annexure-V by 16th August, 2022.

(4) It is to be noted that this option once exercised shall not be allowed to be changed within a period of one year from the date of exercising the option and will remain valid till the end of the financial year for which it is

(5) The GTA is allowed to issue tax invoices and make tax payments @ 5% or 12% under Forward Charge Mechanism (FCM) on the goods transportation service for the period from 18th July, 2022 to 16th August, 2022 before exercising the option to opt for such payment of tax under FCM for the financial year 2022-2023 but in such a case the supplier GTA shall have to exercise such an option to pay GST on its supplies on or before the 16th August,

(6) Kindly note that in case the GTA wishes to continue not paying output tax itself on the transportation services provided, he may continue to remain as such and the recipient of service shall pay such output tax under Reverse Charge Mechanism @ 2.5% each under CGST Act and SGST Act. Here, the GTA shall not be allowed to claim the ITC on the goods and services used to provide such transportation services. However, in case the recipient of transportation of service of goods by a Goods Transport Agency (GTA) has paid tax of such a service under Reverse Charge Mechanism (RCM), such recipient of supply is eligible to claim Input Tax Credit on such tax paid.

To read the full article, find the enclosed attachment

Attached File : 2873893_47478_analysis_of_amendments_in_gta_services_compressed.pdf

FAQ :

From 18th July 2022, certain exemptions for GTA services have been withdrawn, meaning GST now applies to most road transportation of goods. GTAs also have the option to pay GST under the Forward Charge Mechanism (FCM) or continue with the Reverse Charge Mechanism (RCM).

Exemptions have been removed for transportation of goods by a GTA where the charge for a single carriage does not exceed Rs. 1500, or the charge for all goods for a single consignee does not exceed Rs. 750.

GTAs can now choose to pay GST themselves under the Forward Charge Mechanism (FCM) at either 2.5% (without ITC) or 6% (with ITC). If they don't opt for FCM, the recipient of the service will pay GST under the Reverse Charge Mechanism (RCM) at 2.5%.

A GTA can exercise the FCM option by submitting a declaration in Annexure-V by 15th March of the preceding financial year. For the financial year 2022-23, the deadline to opt for FCM was 16th August 2022.

No, once a GTA exercises its option to pay GST under FCM, it cannot be changed for a period of one year from the date of exercising the option and remains valid until the end of that financial year.

If a GTA continues under the Reverse Charge Mechanism (RCM), the recipient of the transportation service is liable to pay the GST at a rate of 2.5% each under the CGST and SGST Acts. The GTA cannot claim ITC in this scenario, but the recipient can claim ITC on the RCM tax paid.

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