Transportation sector is the most critical sector of our economy, which makes it equally important for the sector to come under the purview of Tax system. Goods Transport Agency commonly known as GTA, is one amongst the most unorganized sectors in India. The levy of tax on GTA has always been a contentious issue.
Exemption: By effect of Sl. No. 18(a) Notification 12/2017 CT(R) The Services by way of transportation of goods by road are exempt except the services of—
- a goods transportation agency;
- a courier agency;
Before discussing any further, we need to understand the term Goods Transport Agency, the term has been defined under Notification 11/2017 CT (R) as any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. Therefore, emphasis has been put on issuance of consignment note to cover a goods transporter under the ambit of GTA.
Analysis to AAR: In case of Dinesh Kumar Agarwal, AAR ruled that the transportation charges received by the applicant will attract GST even though the applicant is not a Goods Transport Agency - Such services are taxable as works contract u/s 2(119) of the GST Act. Hence, where transportation is carried out by a goods transporter as a composite supply, Such would be leviable to tax even when not provided by a GTA.
In case of Commissioner of Customs vs. Dilip Kumar (SC) the court has pointed out that Strict interpretation should be followed in the interpretation of notification for exemption, the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
Where the Sl. No. 18(a) of exemption notification12/2017 is strictly interpreted, only a goods transporter issuing a consignment note would be taxable. All other transportation of goods by way of road is exempt. The facts of the case mention that the applicant is not issuing a consignment note.
RCM Applicability: Services by GTA to recipients specified under notification 13/2017 CT (R) are covered under Reverse Charge Mechanism. The persons specified under the said notification are:
(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; located in the taxable territory
RCM is applicable on major GTA services to reduce the compliance procedures for GTAs. However, GTAs are liable to pay tax in cases where tax is not paid under RCM. One such instance is Transport of used household goods for an individual.
An issue of discussion can be whether reverse charge can be paid under forward charge?
In the case of Rashtriya Ispat Nigam Limited vs. M/s Dewan Chand Ram Saran- Civil Appeal No.3905 of 2012, the service tax was paid under the forward charge by the supplier of clearing and forwarding services even if service tax on such services was liable to be paid under RCM. It was held by the Supreme Court of India:
"The provisions concerning service tax are relevant only as between the appellant as an assessee under the statute and the tax authorities. This statutory provision can be of no relevance to determine the rights and liabilities between the appellant and the respondent as agreed in the contract between two of them. There was nothing in law to prevent the appellant from entering into an agreement with the respondent handling contractor that the burden of any tax arising out of obligations of the respondent under the contract would be borne by the respondent."
It should be noted that the above decision was under the erstwhile service tax regime and might hold persuasive value under GST.
GST Rates: GTA service are subject to different tax rates under different scenarios:
- Where GTA services are procured by persons specified in Notification 13/2017 CT(R). Such specified persons are liable to pay tax @ 18%, ITC of the said services can be availed to the extent such services are used for business purpose.
- Where GTAs are providing services to person other than those specified above, a GTA can either charge:
- 5%, However credit of input tax charged on goods or services used fully or partly in supplying such service has not been taken, or
- 12%, however credit of input tax charged on goods or services used fully or partly in supplying such service can been taken. [Notification 20/2017 CT(R)]
Exemption to specified goods: GTA services are exempt when such are used for transportation of goods specified under Notification 12/2017 CT(R). Services provided by a goods transport agency, by way of transport in a goods carriage following services are exempt :
(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;
Other aspects on GTA:
Whether RCM is applicable on payments made for hiring of transport from unregistered GST traders?
RCM under section 9(3) is applicable for GTA and not for transport of goods. Where the vehicle is taken on rent or lease , it will be supply of service under 9966 or 9973 and supply of service will be taxable under RCM under section 9(4).
Tax Invoice [Rule 54(3) of CGST Act, 2017]: Any document containing the following particulars:
- gross weight of the consignment,
- name of the consigner and the consignee,
- registration number of goods carriage in which the goods are transported,
- details of goods transported,
- details of place of origin and destination,
- Goods and Services Tax Identification Number of the person liable for paying tax whether as consigner, consignee or goods transport agency, and
- containing other information as mentioned under rule 46.
The law has been carefully drafted to exclude the unorganised sector in good transport from the levy of GST. In respect of those who provide agency services in transport, the liability is on the recipients in most of the cases or unless option to pay under forward charge.