In case of GTA services, the person who is liable to pay freight is considered as the service recipient. Recipient of GTA service is liable to pay RCM on such freight. Accordingly RCM is payable under CGST, SGST or IGST head.
Consider a situation where as per the terms of contract, the supplier is liable to arrange transportation from his business place to the recipient's premises and also pay freight on it. In this case there can be two possibilities based on which the interplay of composite supply, RCM and transaction value comes into picture.
The supplier is liable to pay freight and arrange transportation. As he is liable to pay freight he is the person who is deemed to be the recipient of GTA services and hence liable to pay RCM as well. RCM shall be paid in cash and the supplier concerned can claim input tax credit on such RCM. this is the RCM position, now what will be the transaction value in this case? will it be inclusive of freight or not? and if yes what shall be the rate of tax appliacable on the whole transaction if consolidated billing is done?
If freight is payable by the supplier, section 15(2)(c) will come into picture. according to section 15(2)(c) incidental expenses charged by the supplier to the recipient and any amount charged for anything done by supplier in respect of supply of goods or services at the time of or before delivery of goods is includible in transaction value. So accordingly freight will be included in transaction value and thus the invoice will be inclusive of value of goods and freight charges.
Now as far as the applicability of GST rate is concerned, suppose the goods supplied are chargeable to tax at 12% and freight is chargeable at 5% under reverse charge. then since in accordance with section 15(2)(c) transaction value will be inclusive of freight, it will be a composite supply and as per the concept of composite supply, the rate of principal supply is applicable on the whole transaction which is 12%.
As per the terms of contract though transportation is to be arranged by the supplier of goods, freight is on 'to pay' basis that is payable by the recipient. In this case, section 15(2)(c) will not come into picture because freight is to be paid by the recipient and accordingly transaction value will not be inclusive of freight.
Therefore since freight is to be paid by the recipient of goods, he is the person who shall be deemed to be the recipient of GTA services and accordingly RCM is payable by the recipient.